MAYBANK Investment Bank (MIB) remains positive on the Malaysia healthcare sector as revenue intensity continues to be the dominant earnings lever amid moderating inpatient volume growth.
“Greater case complexity, boosts in medical tourism, and steady occupancy rate should underpin earnings visibility even as payor pressures persist, in our view,” said MIB.
Capacity expansions from new greenfield/ acquired hospitals are also ramping up, which should support greater earnings momentum into the financial year 2026 estimate (FY26E), across the sector. MIB’s top pick is IHH.
“We believe the deferment of DRG implementation to 2027 should provide a near-term reprieve on price pressure concerns and allow private hospitals to optimise case-mix and pricing strategies,” said MIB.
Long-term, MIB expects a gradual (phased) rollout on DRG, likely to start with lower-acuity procedures which should subdue impact across the board, and hospital players with higher focus on complex cases should be relatively more insulated to DRG impact, in their view.
Separately, Budget 2026’s healthcare-linked initiatives and improving insurance penetration should support margin stability into FY26E.
Medical tourism re-emerges as a positive structural catalyst for earnings uplift, supported by GOM’s efforts to increase international flight routes and frequencies, which should indirectly drive growth in medical tourism, in MIB’s view.
This is positive for all healthcare players as foreign patients typically deliver 20% higher margins due to greater case complexity.
Biggest beneficiary is IHH post-acquisition of Island Hospital, which brought nine months of 2025 (9M25) IHH MY’s foreign patient revenue contribution to 15%, whereas KPJ’s 9M25 landed at 6%.
“Our top pick is IHH at SOTP-TP of MYR9.48 due to its diversified earnings base and re-energised domestic and overseas ops,” said MIB.
MIB also maintains BUY on KPJ at MYR3.00 due to its strong domestic leverage as gestation risks fade.
Key risks identified by MIB are such as insurer payor pressures, unfavourable regulatory policies, rising staff and medical equipment/drug costs, and dragged gestation periods. —Jan 19, 2026
Main image: Stanton Chase
