Healthcare sector to benefit from govt incentives


Local private healthcare operators are poised for a major step-up in revenues and profits from the government-backed national health insurance system, according to AmInvestment Bank Bhd Research.

Although there are no full details yet, the research arm believes that the scheme would force these operators to drive down their prices, but the resulting volume will support them to achieve economies of scale with a slight margin compression.

 “The growth prospects for the sector globally are positive over the long term, underpinned by an aging population, rising affluence and increasing life expectancy.

“The local private healthcare sector has an added catalyst. For example, medical tourism is backed by its highly competitive charges and hospitalisation costs compared to those in developed countries,” it said in a research report today.

According to AmInvestment, other added catalysts include a generally English-speaking population as well as various incentives provided by the government.

“We expect KPJ Healthcare to be the prime beneficiary as the group has presence in almost every state in Malaysia,” it said.

As such, the research house maintained its “neutral” rating on the healthcare sector.

AmInvestment had also upgraded its “neutral” call for the sector to “overweight” should there be a surge in patients due to outbreaks of pandemic diseases; lower-than-expected start-up losses at new hospitals; value-accretive mergers and acquisitions; and a jump in medical tourists.

“In contrast, we may downgrade to ‘underweight’ should there be a significant dropout

of patients from private hospitals due to economic reasons; as well as higher-than-expected and prolonged start-up losses from new hospitals,” it added.

AmInvestment also reckons that the current rich valuations have reflected the fundamentals of IHH Healthcare Bhd and KPJ Healthcare Bhd.

To recall, during the tabling of Budget 2019 on Nov 2, the government proposed a larger budget of RM314.6 billion for the healthcare sector, an increase of 8.3% from 2018 ’s revised figure of RM290.4 billion.