PETALING JAYA: The healthcare sector can look forward to a resilient earnings in 2023, particularly among players in the private hospitals, pharmaceuticals and over-the-counter (OTC) drugs as well as immunotherapy.
“Growth prospects for the sector in the long-term will continue to be underpinned by an ageing population, rising affluence and growing chronic diseases across the globe such as cardiovascular, cancer and respiratory,” said Kenanga Research in its latest report.
The research house has an “overweight” call on the sector with its top picks, namely IHH Healthcare Bhd
with a target price (TP) of RM7.20 and Kotra Industries Bhd with a TP of RM7.
In the private hospitals sphere, Kenanga Research said IHH’s patient throughput growth and revenue intensity would drive 2023 earnings as demand for non-Covid related services including elective surgeries recovers. “In 2023, we expect IHH’s revenue per in-patient growth of 10% to 15% versus an estimated 10% to 20% in 2022, while in-patient throughput growth of 10% to 15% against an estimated 12% to 25% in 2022,” it said.
The group’s bed occupancy rate (Bor) is targeted at 60% to 73% in 2023 compared with an estimated 56% to 70% in 2022 for its hospitals in Malaysia, Singapore, India and Turkey.
Kenanga Research also liked IHH for its pricing power.
The inelastic demand for private healthcare service would allow the group to pass on the higher cost amid rising inflation and its presence in multiple markets such as Malaysia, Singapore, Turkey and Greater China, it added.
Meanwhile, KPJ Healthcare Bhd’s patient throughput is expected to grow at 12% from an estimated 26% in 2022 due to the low base effect in 2021.
The research house noted that KPJ’s Bor at 66% versus an estimated 55% in 2022 would be driven by recovery in demand for its services, particularly, non-Covid-related ones including elective surgeries.
It liked KPJ for its pricing power as “a private healthcare provider and its strong market position locally with the largest network of 28 private hospitals.
As for health supplements and OTC drugs, the research house said the Statista Consumer Market Outlook projected the OTC pharmaceuticals market in Malaysia to grow at a compounded annual growth rate (CAGR) of 6% to an estimated RM3.2bil by 2027.
“This augurs well for Kotra that manufactures and sells OTC supplements and nutritional and pharmaceutical products with key flagship household brands such as Appeton, Axcel and Vaxcel,” it said.
Kenanga Research liked Kotra for its integrated business model encompassing the entire spectrum of the pharmaceutical value chain.
Meanwhile, backed by a new plant, widening distribution network and penetration into local public hospitals, Nova Wellness Group Bhd is guided for a 15% to 18% volume growth, following an average volume growth rate of 16% to 8% from FY20 to FY22, according to the research house.
On the other hand, Pharmaniaga Bhd’s growth in 2023 will be “pedestrian” in the absence of lumpy vaccine sales.
“We expect its concession awarded by the Health Ministry to provide medical supplies to public hospitals will be renewed upon expiry in end-2022,” said Kenanga Research.
For the immunotherapy segment, Kenanga Research said earnings growth of Malaysia Genomics Research Centre Bhd (MGRC) would gather momentum in 2023.
This would be driven by maiden contributions from Thailand and the Middle East as MGRC ramps up its distribution network and footprint overseas for its biopharmaceutical products, said the research house.
“We like MGRC for its exclusive rights to deliver such immunotherapy treatment in the region under a long-term licensing agreement with reputable principals.
“In addition, it is also the leading provider of genetic sequencing and analysis in South-East Asia,” said the research house.
