Maybank IB said medical tourism remained a low-hanging fruit for revenue uplift.
PETALING JAYA: Margins of healthcare providers may see some compression in the short term, but should be cushioned by an anticipated uptick in medical tourism growth.
The domestic healthcare sector has been in the limelight with the recent announcement by the ministry to introduce diagnosis-related groups (DRG) pricing to regulate private hospital bills in a move to contain medical cost inflation.
This move follows Bank Negara’s mandate on co-payment inclusions in all new medical insurance/takaful packages earlier this year.
“Worst-case, margins may be compressed short-term but even this impact should potentially be cushioned by headways in medical tourism (which generally registers 20% higher margins due to greater case complexity, add-on services) and Budget 2025’s increased tax reliefs for medical charges and insurance premiums,” Maybank Investment Bank Research (Maybank IB) said.
It added that medical tourism remained a low-hanging fruit for revenue uplift, favouring the pure Malaysian players such as KPJ Healthcare Bhd
, which stands to be the biggest beneficiary of medical tourism, contributing 6% to revenue in the financial year ended Dec 31, 2023.
The research house pointed out that the healthcare sector has had a remarkable year in terms of sequential earnings outperformance for hospital players.
IHH Healthcare Bhd saw a 12% year-on-year (y-o-y) growth in its nine-month earnings before interest, tax, depreciation and amortisation (Ebitda) while core net profit (CNP) grew 21% y-o-y.
Meanwhile, KPJ registered a 7% y-o-y rise in Ebitda and 23% y-o-y jump in CNP.
The research house maintained its “buy” calls on KPJ and Optimax Holdings Bhd.
It believes that KPJ’s hub-and-spoke model via its ambulatory care centre set-ups as it stands to improve patient flow and frees up operational bed space.
As for Optimax, it believes upside could come from being on-boarded onto several big insurance and takaful panels, which are being targeted for the first quarter of 2025.
