HLIB Research said the outlook remains favourable and has maintained its “overweight” rating on the sector.
PETALING JAYA: Malaysia’s healthcare sector is well-positioned to thrive this year, supported by structural growth drivers and emerging policy reforms that are expected to widen access and enhance operational efficiencies across the private healthcare landscape, analysts say.
According to Hong Leong Investment Bank Research (HLIB Research), the outlook remains favourable, maintaining its “overweight” rating on the sector.
“We continue to like the sector for its resilient long-term structural growth drivers, positioning it as a compelling defensive play amid ongoing macroeconomic uncertainty,” the research house wrote in a report yesterday.
HLIB Research also sees potential upside from a domestic-focused thematic play, spurred by an initial public offering (IPO)-led re-rating, notably from the anticipated listing of Sunway Healthcare Group (SHG) later this year.
“Both IHH Healthcare Bhd
and KPJ Healthcare Bhd are our top picks,” the research house added.
HLIB Research raised its sum-of-parts-derived target price (TP) for IHH Healthcare to RM9.03 per share from RM8.92, reflecting the latest market capitalisations of India-listed Fortis Healthcare and Singapore-listed Parkway Life-REIT. IHH Healthcare has stakes in Fortis Healthcare and Parkway Life-REIT.
For KPJ Healthcare, the research house lifted its sum-of-parts-derived TP to RM3.12 from RM2.66, applying a higher forecast enterprise value-to-earnings before interest, tax, depreciation and amortisation multiple of 16 times for 2025, compared with 14 times previously.
“The revised multiple still represents a conservative 20% discount to our anticipated IPO valuation of at least 20 times, which could be used by SHG.
“In our opinion, the discount is justified, as KPJ Healthcare’s operational and profitability metrics remain on average around 20% weaker versus SHG’s as of last year,” HLIB Research said.
The research house also expressed optimism about recent developments surrounding the diagnostic-related group (DRG) payment system.
“We are positive on the government’s recent decision to implement the DRG payment system, specifically for the upcoming basic health insurance and takaful products, particularly when compared with an earlier proposal, announced last December to amend laws, replacing the current fee-for-service model with DRG-based payments,” the research house said.
The targeted insurance approach is expected to strike a balance between enhancing affordability and preserving the private sector’s commercial sustainability.
“This targeted approach helps to improve accessibility for those priced out of existing insurance and takaful plans, while preserving the commercial viability of the private-healthcare sector.
“Those who can afford comprehensive coverage are likely to retain their existing plans to access premium benefits and branded hospital networks, rather than being limited to mid-priced or non-profit providers,” HLIB Research said.
On March 11, Deputy Prime Minister Datuk Seri Ahmad Zahid Hamidi announced that Bank Negara, in collaboration with the Health Ministry and the Employees Provident Fund (EPF), would spearhead the creation of basic health insurance and takaful products anchored on value-based healthcare principles.
Further details were provided by Health Minister Datuk Seri Dr Dzulkefly Ahmad on March 24, indicating that the products would be structured around the DRG model and initially targeted at private-sector employees.
Although participation by mid-priced hospitals remains voluntary in the absence of amendments to current laws, Malaysians can opt in via EPF’s i-Lindung platform.
Implementation timelines remain unconfirmed for now.
