PETALING JAYA: Malaysia’s private healthcare sector is set for a sustained growth trajectory, driven by structural demand from an ageing population, the rising prevalence of non-communicable diseases, and the country’s ambitions to become a medical tourism hub.
CIMB Research said it believes these tailwinds will support the expansion of hospital capacity and earnings for leading private healthcare operators such as IHH Healthcare Bhd
and KPJ Healthcare Bhd.
According to the research house, private-hospital bed capacity in Malaysia is projected to grow at a compounded annual growth rate (CAGR) of around 4% to 5% between 2023 and 2028, underpinned by ongoing and planned projects nationwide, which will help address the current shortfall in healthcare infrastructure.
Malaysia has two hospital beds per 1,000 population, below the average of 2.5 in developed markets.
“Within our coverage, KPJ and IHH are respectively aiming to expand bed capacity by 53% and 43% (bringing total bed capacity to 6,000 and 4,978) by 2029 and 2028, positioning them well to capture incremental demand,” the research house highlighted in a recent report to clients.
The expansion pipeline includes major projects such as the Gleneagles Kuala Lumpur expansion, Pantai Hospital Penang, Columbia Asia Batu Kawan, and new facilities under Sunway Medical Centre.
By 2028, private hospital bed capacity is expected to reach between 23,000 and 24,000, up from 18,779 in 2023.
On the other hand, Malaysia is also banking on healthcare tourism to fuel private healthcare demand, with the government having set ambitious targets under Visit Malaysia 2026 and the Malaysia Year of Medical Tourism campaigns.
The country welcomed 1.6 million healthcare travellers last year, a 14% year-on-year increase, with Indonesians accounting for up to 80% of healthcare tourism revenue.
“Revenue from healthcare tourism contributed 6% and 12% of KPJ’s and IHH’s Malaysia revenue in 2Q25, respectively, supported by partnerships with foreign referral centres and flagship medical centres,” CIMB Research said.
With the government targeting over 4.7 million Indonesian arrivals next year, healthcare operators are well placed to capture this lucrative segment, the research house said, adding that Malaysia’s competitive pricing, quality facilities, and multilingual workforce have helped position the country as a preferred destination for medical tourists.
Despite the upbeat outlook, it said the sector faces near-term headwinds, with manpower shortages remaining a concern, particularly in the public sector, though private hospitals are less affected.
“We note this issue is less acute for private operators such as IHH and KPJ, which are better equipped to attract and retain talent through competitive pay, digitalisation initiatives, and modern facilities,” CIMB Research said.
On the regulatory front, it reported that the introduction of the diagnosis-related group (DRG) payment system for private hospitals has been delayed to 2027.
More notably, it said the initial phase will cover outpatient cases, which contribute less to revenue and margins, limiting the near-term financial impact.
However, the research house mentioned that uncertainties remain over the rollout of the National Health Insurance Scheme, which could overlap with private medical insurance coverage.
The research house said KPJ, with its predominantly domestic exposure, is deemed more vulnerable to these risks compared to IHH, which benefits from its diversified regional footprint.
CIMB Research reiterated its “overweight” call on the healthcare sector, with IHH named as the top pick.
“We like IHH for its diversified regional asset base, which helps to insulate it from regulatory risks in Malaysia; proven execution track record; premium positioning; and exposure to affluent clientele, supporting earnings resiliency,” the research house said.
In contrast, KPJ is rated a “hold”, as its domestic focus leaves it more exposed to payor pressures and regulatory changes.
