KUALA LUMPUR: RHB Research believes the return of local and foreign patients seeking medical treatment will gradually result in better utilisation rates for the healthcare sector from the third quarter (Q3) 2022 onwards.

The research house said despite soft 1H22 earnings, the healthcare sector saw encouraging patient visit growth during the period, while industry players are poised to leverage on the arrival of international patients post reopening of international borders in April.

The firm said IHH Healthcare Bhd and KPJ Healthcare Bhd posted a solid recovery in operating metrics in their recent second quarter (Q2) 2022 results. 

"Post border reopening in April, the firm said IHH's Malaysia and Singapore operations recorded increases of 17 per cent and 1.5 per cent in the number of returning medical tourists," it said. 

RHB Research said IHH Healthcare Bhd should fare better in terms of medical tourism, reflecting its state-of-the-art medical facilities and strategic geographical presence in meeting the needs of affluent patients. 

In terms of medical tourism revenue contribution, it said IHH has higher exposure than KPJ (15 per cent versus 7 per cent).

This is in line with the firm's expectation for it to leverage on its vast hospital network within the region, to capture pent-up demand from returning medical tourists. 

"For Duopharma Biotech Bhd's (DBB), while the consumer healthcare (CHC) segment delivered better-than-expected sales in July/August, financial year 2022 (FY22) growth may be lukewarm due to the high-base effect in FY21. 

"We expect its CHC revenue growth to be more meaningful from FY23 onwards, driven by strong brand recognition as well as resilient consumer demand for healthcare and supplement products," it said.

Overall, RHB Research continues to like IHH for its better-than-peers' recovery, stronger strategic advantage to capture the return of medical tourists, and relatively resilient healthcare spending.

"Maintain overweight for the sector.

"Key downside risks include re-imposition of border closures in local/overseas markets, lower-than-expected patient visits/revenue intensity growth and unfavourable drug pricing mechanism from the Ministry of Health," it added.