KUALA LUMPUR (Jan 19): RHB Investment Bank Bhd (RHB IB) has maintained its “overweight” rating on the healthcare sector, amid expectations the private healthcare sector’s earnings growth will persist into 2024.

It noted Malaysia’s healthcare tourism recovering to above pre-pandemic levels, ongoing efforts by hospital operators to improve efficiency and diversify revenue sources, as well as international demand for pharmaceutical products as sector catalysts.

The healthcare sector also benefits from sustained demand due to inelastic trends, increasing health awareness, and the ageing population, RHB Research said.
The research house’s top-pick is KPJ Healthcare Bhd (target price or TP: RM1.66), noting that KPJ’s primary focus on enhancing efficiency for hospitals in gestation periods in which hospitals under development are expected to reach break-even by this year. 

RHB IB also noted a narrowing valuation gap with its KLCI component peer IHH Healthcare Bhd, from an average of 18.5% in the last five years to just 5% currently.

Concurrently, IHH (TP: RM6.90), amid the hyperinflation in Türkiye, is expected to diversify revenue sources by catering to patients paying in ex-Turkish lira denominations and implementing timely price adjustments to address cost pressures, the research house said.

It added that IHH has set a target of 3,800 hospital beds over the next five years.

According to the Malaysia Healthcare Travel Council (MHTC), healthcare tourism is projected to generate RM2.2 billion in revenue in 2023, surpassing its pre-pandemic peak of RM1.7 billion in 2019, RHB IB said.

MHTC plans to enhance healthcare tourism by implementing initiatives like the Flagship Medical Tourism Hospital Programme and cross-selling services, the research house added.

Among pharmaceutical companies, RHB IB said Duopharma Biotech Bhd (TP: RM1.41) and Kotra Industries Bhd (TP: RM5.40) are expected to benefit from increased exports, as a significant portion of their revenue, 6% and 45% respectively, comes from international markets.

At the time of writing on Friday, KPJ shares were up two sen or 1.32% to RM1.53, giving it a market capitalisation of RM6.93 billion.

IHH shares were up two sen or 0.34% to RM5.98, for a market capitalisation of RM52.67 billion.

Duopharma was traded at RM1.24, with market capitalisation of RM1.19 billion, while Kotra was traded at RM4.70, giving it a market capitalisation of RM697.08 million.