KUALA LUMPUR: The healthcare sector continued to see encouraging growth in the number of patients in the third quarter (Q3) of 2022, RHB Research said.
The firm said that after the further lifting restrictions related to Covid-19, the sector should benefit from a spike in local and foreign patient visits.
"Moreover, the spillover effect from public and private sector procurement of medication and treatments should continue to benefit the pharmaceutical players under our coverage, such as Duopharma Biotech Bhd and Kotra Industries Bhd," it said in a note today.
Meanwhile, RHB Research said IHH Healthcare Bhd's nine-month 2022 results fell below expectations, hampered by headwinds ranging from the weakening Turkish lira, escalating operating costs (primarily in Turkey), and the nursing staff shortage in Singapore.
On the other hand, KPJ Healthcare Bhd's nine-month 2022 net earnings more than doubled year-on-year based on its ongoing cost optimisation strategies and a pick-up in its Malaysia bed occupancy rate (BOR) by 22 percentage points (ppt) YoY to 66 per cent, which boosted its operating efficiency.
"The company expects to maintain its cost optimisation initiatives in the coming quarters.
"Both IHH and KPJ saw relatively lower revenue intensity as a result of a higher number of elective surgery cases (which have lower average selling prices), as many such procedures were deferred when the Movement Control Order (MCO) was in effect," it added.
RHB Research has maintained its 'Overweight' call on the healthcare sector, with the top pick being KPJ.
"Our sector top pick is now KPJ, underpinned by its robust patient growth trajectory—it has not been affected by nursing staff shortages—as well as its potentially earnings-accretive disposal of an overseas entity by 2023.
"While we remain sanguine on the recovery prospects of the healthcare service providers, KPJ's greater domestic focus accords greater earnings stability.
"For the pharmaceutical sector, we expect a normalisation of raw material prices, easing supply chain bottlenecks leading to lower freight costs, which should alleviate their margin pressures in 2023—Duopharma and Kotra rely on cross-border access to facilitate raw material procurement and export sales," it said.