Brokers' Take

Healthcare sector : BUY rating

26 June 2004
The Business Times

DBS Vickers Research, June 25

RISING incomes in the region, changes in Singapore's population demographics, and government initiatives to develop the island's biomedical sciences sector are major factors that bode well for the regional healthcare sector.

We highlight six companies offering attractive growth prospects with reasonable valuations.

These companies provide investors with significant upside potential from current levels due to several salient factors. The stocks have businesses that generate strong cash flows, increasing the likelihood of management maintaining or raising dividend payout ratios along with increased earnings. Decent dividend yields also improve the defensive qualities of the stocks, so we expect investor appeal for healthcare stocks to increase along with the weaker upward momentum shown by the stock market recently.

All six companies also have significant exposure to the regional economies and are positioned to ride on the expected economic upturn in the Asia-Pacific region.

Finally, these companies are still in the early phases of their internal expansion cycles. Relative to current valuations, investors can expect impressive growth rates to continue for the next two years. Our two-year EPS-CAGR average for the sector stands at 48 per cent. We have BUYS on Cerebos Pacific, Parkway Holdings, Eu Yan Sang, Raffles Medical, Osim International and AsiaPharm.

- Compiled by KENNETH LIM, VEN SREENIVASAN