Prices are feared to dip in coming months.
Singapore's healthcare stock index is trading at a steep valuation of 30x price-to-equity. Analysts at Maybank Kim Eng believe that valuations are still justifiable as the companies have good expansion plans, earnings resilience, strong cash flow and healthy balance sheets to fund growth.
Although fundamentals remain intact, the report cautioned that share prices are likely decline in the future due to sell-offs by institutional investors.
"Singapore’s healthcare stocks’ earnings have been generally resilient. But in uncertain markets, their stock performances correlate more with the broader market, diverging temporarily from their fundamentals. Current short-term weakness caused by market weakness and stake reductions by institutional investors could present buying opportunities, in our view," said the report.
In particular, Raffles Medical and IHH could be sold down after their institutional-fund investors trimmed stakes in the companies.
On the other hand, the report said that smaller-cap Q&M and ISEC are being supported by share buybacks from the companies themselves and major shareholders.
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