THE private healthcare sector anticipates a surge in performance fuelled by various growth factors in the upcoming months of 2024. RHB research projects a robust outlook, citing organic expansion strategies and the recent visa-free entry into Malaysia for tourists from China and India as key drivers.
The anticipated uptick is further bolstered by several underlying trends.
Firstly, an increasing prevalence of non-communicable diseases (NCDs) and heightened health awareness among consumers contribute to a growing demand for healthcare services.
Moreover, the aging demographic profile of society adds to the sector’s growth trajectory.
Maintaining an ‘Overweight’ call on the sector, RHB research adopts a risk-on approach, favoring companies with the capacity to manage higher costs and exhibiting inelastic demand.
Among these, IHH Healthcare Bhd emerges as the top pick, attributed to its sturdy financial position, well-established medical infrastructure, and strategic appetite for expansion through acquisitions.
IHH’s valuation is deemed attractive, trading below historical means in terms of enterprise value/earnings before interest tax depreciation and amortisation (EV/EBITDA).
Conversely, KPJ Healthcare Bhd is perceived to be trading at an unjustified premium over IHH, given the latter’s more aggressive expansion plans.
The global healthcare landscape is poised for intensified merger and acquisition activities, with hospitals grappling with financial and operational challenges.
“Being the largest healthcare service provider in Asia, IHH’s clinical excellence and advanced medical equipment could enable it to spread its geographical presence in the high-growth region,” said RHB research.
On the pharmaceutical front, RHB research forecasts a robust recovery driven by growth in consumer healthcare and over-the-counter product segments. This resurgence is anticipated to benefit from increased hospital activities and a surge in foreign tourist arrivals.
“This recovery is also expected to benefit from increased hospital activities and a rise in foreign tourist arrivals.”
However, the sector faces potential downside risks, including unforeseen operating costs, fluctuations in patient visits and revenue intensity growth and unfavourable changes to drug pricing mechanisms by the Health Ministry. – June 7, 2024
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