Private hospitals in Malaysia are experiencing strong growth, with operators expected to see double-digit earnings increases this year, according to BIMB Securities Research. This growth is driven by higher numbers of inpatient and outpatient visits, as well as a steady recovery in hospital admissions. Demand for private healthcare remains strong, fueled by both local and international patients.
Highlights of 2024 Performance
In the first nine months of 2024, major hospital groups IHH Healthcare Bhd and KPJ Healthcare Bhd reported significant growth in both revenue and earnings. Key factors contributing to this growth include:
- Health Tourism: Although it currently contributes less than 15% of revenue for these companies, health tourism is growing. This is supported by:
- Modernised facilities
- Increased digital healthcare adoption
- Rising chronic disease cases
- Higher healthcare spending by Malaysians, which now averages RM2,022 per person annually, a 17% increase from 2020.
- Chronic and Specialised Care: The demand for medications and treatments for chronic conditions is increasing, boosting pharmaceutical demand. Companies like Pharmaniaga Bhd are advancing with innovations such as Wosulin, a recombinant human insulin.
Industry Outlook
BIMB Securities Research maintains an “overweight” rating for the private healthcare sector due to its positive outlook. Key factors include:
- Expansion of hospital capacity
- Increased demand for elective surgeries
- Growth in health tourism revenue
- A rising ageing population
The research house has issued a “buy” recommendation for IHH Healthcare, with a target price of RM8.60 per share, citing strong activity and growth potential. For KPJ Healthcare, it suggests a “hold” call with a target price of RM2.52, as current market expectations are already reflected in its valuation.
Impact of Inflation
Inflation has had minimal impact on private hospital demand. Healthcare providers are passing on rising costs to consumers, with middle- and high-income groups continuing to drive demand.
- Healthcare Costs:
- Malaysia’s health consumer price index has steadily risen, driven by:
- Advanced medical technologies
- Ageing population
- Demand for quality care
- Malaysia’s health consumer price index has steadily risen, driven by:
- Stable Inflation:
- Medical products and equipment costs remain stable, with inflation below 2% in recent months.
- Health services inflation has risen by around 4% since mid-2024 due to growing demand, averaging 0.6% annually since 2017.
Challenges and Opportunities
While the growth in private healthcare aligns with global trends, affordability remains a concern. Efforts to balance high-quality care with reasonable costs will be critical for sustaining demand. Malaysia’s private healthcare sector is poised for continued growth, supported by strong fundamentals, technological advancements, and a growing focus on patient-centered care.
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