KUALA LUMPUR: Healthcare sector spending is expected to hit US$10 trillion by 2026, up from US$8.4 trillion in 2022, with an average annual growth rate of 3.5 per cent over the next five years, Kenanga Research said.
The demand for private healthcare is expected to continue to gain traction in calendar year 2024 (CY24), underpinned by growing patients throughout the higher yields from a case-mix with acute cases.
"Also helping will be better operational efficiency, cost optimisation and overhead absorption thanks to a gradual ramp up of new beds," it said today.
Kenanga Research expects IHH Healthcare Bhd's hospitals in Malaysia, Singapore, India and Türkiye to see revenue per inpatient grow by 12 per cent to 16 per cent, inpatient throughput increase by 9.0 per cent to 12 per cent, and a bed occupancy rate (BOR) ranging from 65 per cent to 73 per cent in 2024.
"We believe the key growth factor for its inpatient throughput and BOR would be revenue intensity from a case-mix with more acute cases and medical tourists, the addition of new beds (previously constrained by staff shortages which are gradually easing).
"We expect sustained performance in Malaysia, while staff shortages in Singapore have been resolved.
"There is also a return of Middle Eastern and Central Asian medical tourists to its hospitals in Türkiye and India," it added.
The firm anticipates an 8.0 per cent growth in KPJ Healthcare Bhd's patient throughput in comparison to the 6. 0 per cent recorded in the financial year 2023 (FY23).
The BOR is expected to be 71 per cent, propelled by increased revenue intensity resulting from the resurgence in demand for elective surgeries.
"Thanks to high patient throughput, two of its new hospitals have turned EBITDA-positive while the other two only recorded small operating losses.
"We expect KPJ's earnings to gain momentum moving into FY24 on better operational efficiencies from its cost optimisation effort and overhead absorption rate as a result of a gradual ramp-up in opening new beds up to 9 per cent, which we have factored into our forecast," it said.
Kenanga Research also sees robust sales of pharmaceuticals and over-the-counter (OTC) drugs backed by increased health awareness.
"Over the longer term, the prospects of private healthcare will continue to be underpinned by rising affluence and an ageing population," the research firm said.
The Statista Consumer Market Outlook predicts that the over-the-counter (OTC) pharmaceuticals market in Malaysia will see a 6.0 per cent annual growth, reaching an estimated US$715 million (RM3.2 billion) by 2027.
This is attributed to consumers adopting a proactive approach to health, including regular use of health supplements, particularly in the post-Covid-19 era.
Kenanga Research maintained an "Overweight" recommendation for the healthcare sector, highlighting KPJ and IHH with target prices of RM1.56 and RM7 respectively as its preferred choices within the sector.