COMPETITION in the healthcare sector is likely to remain strong, OCBC Investment Research said on Wednesday.
Following the recent earnings season, the markets saw steadier earnings from healthcare providers such as Raffles Medical Group (RFMD) and IHH Healthcare Berhad (non-rated), as compared to a poor showing of results from Biosensors International Group (BIG).
On a broad-based view, the FTSE ST Health Care Index (FSTHC) has been performing better than the FSSTI with an 8.1 per cent year-to-date gain as compared to FSSTI's marginal 0.02 per cent year-to-date gain, said the research house. It added that however, FSTHC has been trading above its two-year historical average over the past six months, and valuations do not seem sufficiently attractive.
And while favourable demographics will lead to an increase in demand for the long term, the government is also expanding the public healthcare infrastructure to address capacity pressures, it said.
"Thus, with on-going expansion from private sector players as well, competition in the sector is likely to remain strong. Hence we maintain our NEUTRAL stance on the sector. Within our coverage, we have a HOLD rating on RFMD with S$3.91 fair value estimate, and a SELL rating on BIG with a fair value estimate of S$0.60."