KUALA LUMPUR: Demand for private healthcare services locally and globally is expected to bode well for Malaysia's healthcare sector.
CGS-CIMB Research said IHH Healthcare Bhd and KPJ Healthcare Bhd's earnings per share (EPS) are expected to grow 19 per cent and 13 per cent, respectively, for the financial year 2023 (FY23).
The continued recovery in patient volumes and revenue intensity post-Covid-19 will help lift total revenue by 8.4 per cent year-on-year for both companies.
A rebound should also aid KPJ's associated earnings and the normalisation of effective tax rates.
"We believe patient visitations would improve progressively in FY23-24 across both groups' operations (from both domestic and foreign patients), leading to blended bed occupancy rates (BOR) reverting to optimal/pre-Covid-19 levels of 65-75 per cent for IHH and KPJ in upcoming quarters.
"This may be driven by the structural demand for private healthcare services locally/globally, health tourism recovery and capacity expansion," said its analyst Sherman Lam.
Malaysian hospitals' health tourism patient volumes and revenues have rebounded strongly since the reopening of the travel borders in April.
Health tourism accounted for six per cent of Malaysia's revenue for KPJ and IHH in 2019 (pre-pandemic).
KPJ's Malaysia health tourism patients rose 22 per cent sequentially in the third quarter (Q3) of 2022, while IHH's and Ramsay Sime Darby Health Care have recovered to or surpassed pre-pandemic levels.
Sunway Healthcare Group's Sunway Medical Centre also saw more than five times growth in health tourism visits in August versus April.
The research firm also projected Duopharma Biotech Bhd's (DBB) FY23 EPS to rise three per cent YoY on a one-off reinvestment allowance upon commissioning its K3 plant, excluding which EPS would fall seven per cent due to higher raw material and interest costs.
"Meanwhile, we see Pharmaniaga Bhd's FY23 core EPS rising 8 per cent and Kotra Pharma (M) Sdn Bhd FY23 EPS easing eight per cent due to higher advertising and promotion costs, raw material costs and effective tax rate," it said.
Elsewhere, Optimax Eye Specialist Centre Sdn Bhd's FY23 EPS may be up 17 per cent YoY, driven by its network expansion, structural demand and improving revenue intensity.
"We stay sector Overweight, premised on the inelastic and structurally increasing demand for private healthcare services locally and globally.
"IHH is our preferred hospital pick due to its multiple growth opportunities in different markets, while DBB is our top pharma pick for its growing exposure to more niche/potentially higher-ROIC biologics," added the firm.