Healthcare providers to benefit from rising demand

Global healthcare expenditures are projected to reach US$10 trillion by 2026, rising from US$8.4 trillion in 2022, Kenanga Research said.

PETALING JAYA: The growth prospects of the healthcare sector over the longer term will continue to be underpinned by an ageing population, rising affluence and rising cases of chronic diseases globally.

Global healthcare expenditures are projected to reach US$10 trillion by 2026, rising from US$8.4 trillion in 2022. This represents a compounded annual growth rate (CAGR) of 3.5% during the five-year period, said Kenanga Research.

The over-the-counter pharmaceuticals market in Malaysia, meanwhile, is expected to grow at a CAGR of 6% to an estimated RM3.3bil by 2027.

This will be due to consumers taking a more proactive stance towards their health and well-being, including taking health supplements on a regular basis, especially following the Covid pandemic.

The research firm said these trends augur well for hospitals and pharmaceuticals players in the country.

In 2024, it expects IHH Healthcare Bhd’s revenue per inpatient growth of 12%-16% versus an estimated 19% in 2023 due to low-base effect in 2022.

“We believe the key growth factor for its inpatient throughput and bed occupancy rate (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 that 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 Turkiye and India,” said Kenanga Research.

It likes IHH for its pricing power because the inelastic demand for private healthcare services allows providers such as IHH to pass on higher costs amid rising inflation.

The healthcare group also has a presence in multiple markets such as Malaysia, Singapore, Turkiye and China.

Similarly, in 2024, it expects KPJ Healthcare Bhd’s patient throughput to grow at 9% (versus an estimated 7% in 2023 with BOR at 72% (versus 67% in 2023), driven by revenue emanating from the recovery in demand for elective surgeries.

KPJ Healthcare also has pricing power and a strong market position locally with the largest network of 28 private hospitals versus 16 of the next largest player, IHH.

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