RHB Research said private healthcare is set to record stronger numbers this year.
KUALA LUMPUR: Medical tourism will continue to spur the growth in private hospital names such as KPJ Healthcare Bhd
and IHH Healthcare Bhd.
KPJ has been proactively attending various health tourism (HT) expos overseas this year as it intends to boost its HT segment contribution to 40% of the group revenue by 2028.
RHB Research said KPJ is a top pick as it will be buoyed by the improvement in operating efficiency from its hospitals and the pick-up in its medical tourism segment.
For the sector overall, private healthcare is set to record stronger numbers this year, the research house said.
This is due to organic expansion strategies, visa-free entry into Malaysia for tourists from China and India, the growing incidence of non-communicable diseases, rising health awareness among consumers and a rapidly ageing society.
“While the healthcare sector generally has defensive attributes, we continue to advocate for investors to lean towards domestic-centric names in view of better earnings stability,” RHB Research said.
“For healthcare service providers, we expect the first quarter’s performance to be muted due to the seasonally shorter working months that coincided with the Lunar New Year celebration. Nonetheless, results for the second half of the year should continue to hold up steadily,” it added.
The research house maintained its “overweight” stance on the healthcare sector, underpinned by the relatively inelastic demand trends coupled with rising health awareness among consumers and the bigger trend of an ageing society.
KPJ remains its sector top pick with a target price of RM2.12, premised on its strategic rebranding and growth exercise and an improvement in operating efficiency.
Its hospitals under development or upgrading are expected to achieve earnings before interest, taxes, depreciation and amortisation breakeven by end-2024, the research house said.
Meanwhile, RHB Research said the pharmaceutical sector should see a robust recovery in the second half of the year, underpinned by a pick-up in consumer healthcare and over-the-counter product segments.
Factors aiding this are the spillover effect of rising hospital activity and a surge in foreign tourist arrivals, it said.
