PETALING JAYA: The private healthcare sector is expected to regain earnings momentum in the second quarter of 2026 (2Q26) after a softer start to the financial year, as hospitals benefit from stronger inpatient volume and tighter cost discipline.
CIMB Securities Research said the near-term weakness should be viewed as temporary, expecting quarter-on-quarter earnings recovery in 2Q26, supported by operational efficiency gains, disciplined expansion strategies, and organic growth in inpatient admissions, despite sequentially weaker first-quarter results because of seasonal disruptions linked to the Hari Raya Aidilfitri festive period.
The research house said outpatient traffic in 1Q26 was likely softer year-on-year as Hari Raya fell earlier this year, around 10 days ahead of the corresponding festive period in 2025, reducing patient footfall within the quarter.
“As outpatient treatments are typically non-urgent and discretionary, they are more likely to be deferred during festive periods,” CIMB noted.
However, it added that top-line growth should remain positive, driven by a higher-intensity case mix as hospitals continue to treat more complex and higher-acuity procedures.
Despite near-term earnings softness, CIMB maintained its “overweight” call on the healthcare sector, underpinned by long-term structural demand from Malaysia’s ageing population, rising prevalence of non-communicable diseases and growing health awareness.
The brokerage said valuation multiples for private hospital operators had risen sharply, with blended enterprise value-to-earnings before interest, taxes, depreciation, and amortisation or EV/Ebitda for major players now above the sub-sector’s three-year historical average.
It, however, expected valuations to hold at current levels because sector fundamentals remain intact.
“We view any near-term share price weakness as a buying opportunity,” the report said.
The research house pointed out that IHH Healthcare Bhd
planned to add 2,800 beds, with both groups continuing to favour brownfield expansion rather than more capital-intensive greenfield developments.
CIMB said this strategy should help shield operators from higher construction costs amid geopolitical uncertainty, including risks linked to the ongoing US-Iran conflict.
Its channel checks also found no acute supply shortages affecting hospitals or medical equipment distributors so far, apart from elevated logistics costs.
“Private hospitals report a similar situation with no operational disruptions at this stage, supported by diversified vendor supply chains and proactive inventory management,” CIMB said.
Another emerging catalyst is the rollout of the medical and health insurance and takaful (MHIT) base plan, with selected private hospitals expected to join a pilot programme in Greater Klang Valley from July 2026 under a diagnostic-related group reimbursement model.
“This pilot programme will serve as an important testing ground to assess the effectiveness of the proposed diagnostic‑related group or DRG-based reimbursement model, while identifying potential operational and implementation challenges ahead of a nationwide rollout in 2027,” CIMB said.
It added that while participation in the MHIT scheme is not mandatory, several private hospitals have indicated their commitment to joining the programme.
An analyst told StarBiz that the healthcare outlook remains supported by resilient domestic demand, pricing flexibility in specialised care, and policy developments that may ease insurance-related payor pressure after Bank Negara Malaysia’s temporary cap on medical premium hikes expires at end-2026.
