PETALING JAYA: Medical tourism remains a key growth catalyst for the Malaysian healthcare sector, as capacity constraints, specialist shortages and higher treatment costs in Indonesia’s healthcare system drive robust demand for outbound medical travel.
Phillip Capital Research sees “no signs of a slowdown” in Indonesian medical tourism, citing structural gaps in the neighbouring country’s healthcare system and Malaysia’s cost advantage.
From 2020 to 2025, the medical tourism industry recorded a compound annual growth rate of 33%, reaching RM3.4bil, largely fuelled by Indonesian patients, who comprised around 70% of arrivals in 2025.
Over 970,000 Indonesian patients travelled to Malaysia for healthcare services in 2025, marking a 23% year-on-year (y-o-y) rise, according to the research house.
It noted that the implementation of sales and service tax on foreign patients since July 2025 has not had any meaningful impact on Indonesian arrivals, reflecting strong underlying demand for Malaysian healthcare services.
Indonesia continues to face structural healthcare supply issues, such as low hospital bed density and limited specialist availability. Phillip Capital said consequently, Malaysia has emerged as a preferred destination due to its more affordable treatment costs, broader specialist network, strong cultural affinity and improving air connectivity.
It maintained an “overweight” call on the healthcare sector, citing earnings resilience backed by sustained healthcare demand and continued capacity expansion to meet growing healthcare needs.
IHH Healthcare Bhd
was retained as the top “buy”, with a target price (TP) of RM11.03. Its other preferred sector picks are KPJ Healthcare Bhd (TP: RM3.80), Optimax Holdings Bhd (TP: 81 sen) and UMediC Group Bhd (TP: RM0.43).
It said KPJ and IHH remain the key beneficiaries of medical tourism demand, with KPJ’s medical tourism revenue growing approximately 24% y-o-y in the first quarter of 2026, while IHH’s Malaysian operations recorded double-digit growth, supported by key hospitals including Island Hospital, which has lifted foreign patient contribution to about 15% of revenue.
