The doctor is in: Robust earnings for healthcare sector in 2012

OCBC says the sector will keep on thriving next year as medical tourism trade continues to prosper.

The growing and aging population, and government initiatives to reduce the burden on the public sector also help boost the industry.

Here’s more from OCBC:

Review of 2011. The FTSE ST Health Care Index has continued to outperform the broader market significantly YTD, following its stellar performance in 2010. Healthcare companies under our coverage also managed to deliver decent growth despite the volatile business climate. Looking ahead, macroeconomic uncertainties and downside risks to corporate earnings may continue to impact investor sentiment and result in higher risk aversion.

Defensive earnings underpinned by healthy industry fundamentals. Hence we believe that the outperformance of the healthcare sector could continue in 2012, underpinned by robust industry fundamentals and defensive earnings of healthcare companies. These include (i) a growing and aging population, (ii) rising affluence in the region and prospering medical tourism trade, (iii) government initiatives to reduce the burden on the public sector, and (iv) technological advancement which lends growth to the medical device industry.

Premium for quality healthcare firms. In our opinion, certain listed healthcare entities in Singapore such as Raffles Medical Group offer a unique investment proposition to one's portfolio. This is because they have the potential to capture the immense growth opportunities arising from increasing demand for high-quality healthcare services in the region, while generating earnings that are relatively resilient in nature since medical care would still be required even in recessionary times, although not entirely immune to a macroeconomic slowdown. This could be a key factor why the healthcare sector typically commands a premium over the broader market, especially for larger healthcare players which tend to have a stronger financial position, quality assets owned and ability to leverage on economies of scale to achieve operating efficiencies.