PETALING JAYA: Kenanga Research has maintained its “neutral” stance on Malaysia’s healthcare sector, saying the strong long-term fundamentals remain overshadowed by expensive valuations among listed private hospital operators and only modest earnings growth.
“We reiterate our ‘neutral’ call on the healthcare sector. Generally, the private healthcare players’ valuations appear rich compared to their pedestrian earnings growth,” Kenanga Research said.
It noted IHH Healthcare Bhd
is trading at 16 times and 15 times financial year 2026 (FY26) and FY27 enterprise value-to- earnings before interest, taxes, depreciation and amortisation (EV/Ebitda), respectively, with its valuation having expanded even as earnings growth remained weak.
Meanwhile, Sunway Healthcare Holdings Bhd commands a rich valuation at 24 times FY27 EV/Ebitda. Kenanga Research said this is supported by its stronger growth outlook, with net profit forecast to rise 12% in FY26 and accelerate 43% in FY27.
“This growth trajectory comfortably outpaces its Indian counterparts, justifying its premium positioning within the Malaysian market,” the research house added.
It expected the rollout of the government’s base medical and health insurance and takaful (MHIT) plan to have little immediate impact on hospital earnings, while medical tourism continues to underpin sector growth.
The research house said the base MHIT plan is a positive step towards improving healthcare accessibility and widening insurance coverage.
It views the programme as the first step in Malaysia’s gradual transition from the traditional fee-for-service model to a diagnosis-related group (DRG) payment system.
Kenanga Research believes the DRG framework could compress margins in the longer term, particularly for hospitals that derive a larger share of revenue from high-end and complex procedures.
It also cautioned that insurers are tightening claims approvals and becoming more aggressive in negotiating pricing amid rising medical inflation, adding another layer of pressure on hospital operators.
While remaining cautious on IHH and Sunway Healthcare due to limited upside at current valuations, the research house noted that these operators continue to pursue expansion strategies.
IHH is increasing its day-care services and overseas footprint, while Sunway Healthcare is adding capacity to capture rising patient volumes and medical tourism demand.
Medical tourism remains one of the sector’s strongest growth catalysts. Kenanga Research expects Malaysia to continue benefiting from rising patient arrivals, particularly from Indonesia, supported by competitive pricing, quality healthcare services and proximity.
