The prospects of private healthcare will continue to be underpinned by rising affluence and an ageing population, Kenanga Research said.
PETALING JAYA: The demand for private healthcare will continue to gain traction in 2024 with the growing patient throughput and higher yields from a case-mix with more acute cases, says Kenanga Research.
The sector will be aided by better operational efficiencies, cost optimisation and overhead absorption with a gradual ramp-up of new beds, besides robust sales of pharmaceuticals and over-the-counter (OTC) drugs backed by increased health awareness, the research house added.
Over the longer term, the prospects of private healthcare will continue to be underpinned by rising affluence and an ageing population, said Kenanga Research in its latest report on the sector yesterday.
Its top picks for the sector are KPJ Healthcare Bhd
with a target price (TP) of RM1.56 and IHH Healthcare Bhd at a TP of RM7 a share.
The research house, which has an “overweight’’ call on the sector said: “Global healthcare expenditures are projected to reach a total of US$10 trillion by 2026. Amplifying the demand for private healthcare are surging chronic diseases across the globe.”
For IHH, its patient throughput growth and revenue intensity is expected to drive 2024 earnings, Kenanga Research noted.
The research house said IHH’s expects revenue per inpatient growth to be 12%-16%, inpatient throughput growth at 9%-2% and bed occupancy rate (BOR) of 65%-73% for its hospitals in Malaysia, Singapore, India and Turkiye.
Similarly, in 2024, the research house expects KPJ’s patient throughput to grow at 8% with BOR at 71% driven by revenue intensity emanating from the recovery in demand for elective surgeries.
It also expects KPJ’s earnings to gain momentum moving into 2024 on better operational efficiencies from its cost-optimisation efforts and overhead absorption rate as a result of a gradual ramp-up in opening new beds (9%).
Statista Consumer Market Outlook projects the OTC pharmaceuticals market in Malaysia to grow to an estimated US$715mil by 2027 as consumers take a more proactive stance towards their health and well-being including taking health supplements regularly.
The trend augurs well for Kotra Industries Bhd, for which Kenanga Research has a TP of RM6.03. The company manufactures and sells OTC supplements and nutritional and pharmaceutical products under key flagship household brands such as Appeton, Axcel and Vaxcel.
The research house also expects financial year 2024 (FY24) sales volume for Nova Wellness Group Bhd (TP: 84 sen) to rise by 15%, fuelled by gradual ramp-up of its new plant and the full-year impact from 35 new products introduced in FY22.
Meanwhile, Pharmaniaga Bhd (TP: 31 sen), which is still under the Practice Note 17 status, guided for no further provisions going forward. However, the company still holds some unsold vaccines which have already been fully provided for and has managed to sell some of them.
