CIMB Securities Research said it expects relatively modest growth in 2024 in the high single-digit to low-teens range.
PETALING JAYA: The country’s health tourism (HT) sector is poised to grow at a moderate pace this year due to the lack of strong growth catalysts.
CIMB Securities Research said with 2023 HT revenue hitting RM2.3bil, far exceeding the pre-Covid-19 pandemic level of RM1.7bil in 2019, it expects relatively modest growth in 2024 in the high single-digit to low-teens range, owing to a lack of strong growth catalysts after recent gains.
“That said, we are optimistic about a mid to long-term growth of about 10% to 15%, supported by Malaysia’s strength in providing affordable and high-quality care in the region, and rising demand from Indonesians for private healthcare services.
“This growth will likely be further supported by a more relaxed Malaysia My Second Home or MM2H 2024 programme, with reduced requirements for fixed deposits, offshore income and liquid assets, in addition to higher tourist arrivals under the Visit Malaysia Year 2026 campaign, which aims to attract 35.6 million international tourists compared with 20.1 million in 2023,” the research house added.
The country’s HT revenue has grown robustly, achieving a compound annual growth rate of 17% from 2015 to 2019.
The sector was hit hard by the pandemic, but rebounded sharply in 2022 (growth of 117% year-on-year (y-o-y) and 2023 (a rise of 74% y-o-y).
The primary risk to Malaysia’s HT sector is the potential slowdown in arrivals from the Indonesian market, given its high dependency on Indonesian patients.
This risk has been brought to particular attention in light of the recent steps taken by the Indonesian government to curb medical traveller outflows, including establishing a 41-ha special economic zone in Sanur, Bali (set to open by early 2025), and streamlining the employment process for foreign doctors and Indonesian graduates from abroad.
However, the brokerage believes the above initiatives are unlikely to pose significant threat to the Malaysian HT sector in the near to medium term.
It attributes this to the much shorter flight time from Medan to Penang compared with from Medan to Bali, particularly since Medan is a major source of medical tourism travellers for Penang, Malaysia’s leading HT destination, and the time required for the local healthcare system to undergo infrastructural changes before it will be able to meet regional standards and regain public trust.
The research house is maintaining its “overweight” stance on the sector, with IHH Healthcare Bhd
as its sector top pick, supported by its robust earnings growth potential, high-calibre and diversified asset portfolio, strong pricing power from its premium market positioning, which bolsters margins, and solid recognition among foreign investors due to its dual-listing status.
