KUALA LUMPUR: RHB Research forecasts a stronger performance in the private healthcare sector this year, propelled by factors such as organic expansion efforts and boosted tourism from China and India with visa-free entry.
The firm highlights that an increasing prevalence of non-communicable diseases (NCDs), rising health consciousness among consumers, and the ageing population are also expected to drive performance in the sector.
It anticipates a muted performance for healthcare service providers (HSP) in the first quarter of 2024 (1Q24) due to shorter working months during the Lunar New Year celebration.
"With that, we think the key focus for KPJ Healthcare Bhd will primarily hinge on the improvement in operating efficiency from hospitals under their gestation periods and the pick-up in the health tourism (HT) segment.
"We learned that KPJ has been proactively attending various HT expos overseas this year as it intends to boost its HT segment contribution to 40 per cent of the group revenue by 2028," it added.
The firm also highlighted that IHH Healthcare BHd's growth strategy will be reinforced by its plan to increase bed capacity, with a target of adding 4,000 more beds over the next five years.
"Nonetheless, we still see various uncertainties ranging from regulatory risks arising from India (standardisation of private healthcare rates with the public sector) and the hyperinflation environment from Turkey to limit IHH's near-term share price upside," it noted.
RHB Research forecasts that the performance of HSP in the latter half of 2024 (2H24) and beyond will remain stable, fueled by organic growth in patient footfall.
Regarding the pharmaceutical sector, RHB Research anticipates a strong rebound in the 2H24, supported by an uptick in consumer healthcare and over-the-counter product segments, as well as boosted by increased hospital activities and a rise in foreign tourist arrivals.
"We also expect a pick-up in export sales post reopening of borders, as well as an improvement in economic activities in 2024 to benefit the manufacturers of generic medicines that we cover," it added.
The firm highlighted that the government's augmented budget allocation for medicine procurement in 2024, coupled with the expected finalisation of price negotiations under the Approved Products Purchase List (APPL) mechanism by the second quarter of 2024 (2Q24), are expected to strengthen earnings growth for Duopharma Biotech.
RHB Research is maintaining an 'Overweight' call on the sector, driven by relatively stable demand trends, increasing health consciousness among consumers, and the ageing population.
"KPJ remains our top pick in the sector due to its strategic rebranding and upscaling efforts, expected growth in the health tourism segment, and anticipated improvement in operating efficiency with hospitals reaching earnings before interest, taxes, depreciation, and amortisation (EBITDA) breakeven by the end of 2024," it said.