Private hospital operators to gain from strong patient volumes

RHB Research said it is still overweight on the healthcare sector, underpinned by relatively inelastic demand which offers investors a defensive play.

PETALING JAYA: The strong recovery in patient volumes at private hospitals following the reopening of borders and lifting of restrictions may hit a normalisation level moving forward.

The patient volume growth had been driven by returning foreign and local patients since April last year.

According to RHB Research, KPJ Healthcare Bhd and IHH Healthcare Bhd’s patient volume had recorded a growth in the first quarter (1Q) despite it being a seasonally weaker quarter.

“Bed occupancy rate (Bor) growth trend continued in 1Q, even surpassing pre-pandemic levels.

“We are still ‘overweight’ on the healthcare sector, underpinned by relatively inelastic demand which offers investors a defensive play amid ongoing macroeconomic challenges that could adversely affect the resilience of consumer demand going forward,” the research house said.

According to RHB Research, KPJ Healthcare remains its top pick in the sector due to its organic expansionary strategy to drive growth. It added that KPJ is less impacted by the nursing staff shortage.

“As we remain sanguine on healthcare service providers, we think KPJ’s greater domestic focus offers better earnings stability,” RHB Research said. Its target price for KPJ is RM1.46 a share.

On KPJ’s 1Q result, the research house said its core earnings had more than doubled, increasing the Bor by 23 percentage points year-on-year (y-o-y) to 70%.

This had led to better operating efficiencies, coupled with increased inpatient visits that rose 39% y-o-y.

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