KUALA LUMPUR: Malaysia's health tourism sector may see modest growth this year, likely within a high single-digit to low-teens range, as the sector currently lacks strong growth catalysts following recent gains, according to CIMB Securities Sdn Bhd.
The sector generated RM2.3 billion in revenue last year, significantly above the pre-pandemic level of RM1.7 billion in 2019.
"That said, we are optimistic about a mid- to long-term growth of about 10 to 15 per cent, supported by Malaysia's strengths in providing affordable and high-quality care in the region and rising demand from Indonesians for private healthcare services," it said in a note.
"This growth will likely be further supported by a more relaxed Malaysia My Second Home (MM2H) 2024 programme with reduced requirements for fixed deposits, offshore income, and liquid assets, in addition to higher tourist arrivals under the Visit Malaysia Year 2026 campaign, which aims to attract 35.6 million international tourists compared with 20.1 million in 2023."
CIMB Securities said Indonesia is the key source market for Malaysia's health tourism sector, with a 65.8 per cent share of the nation's health tourism revenue, far exceeding China's 5.1 per cent and India's 3.1 per cent.
"We believe that the strong demand for Malaysia's private healthcare services among Indonesians primarily stems from a lack of trust in the local healthcare system, as well as Malaysia's advantages in providing high-quality care, affordability, proximity, and language and cultural affinity.
"Although Singapore and Thailand are also known as well-established health tourism hubs in Southeast Asia, they cater to different markets. For instance, Singapore tends to attract wealthier Indonesians seeking complex procedures given the higher costs, while Thailand is better known for wellness, aesthetic, dental, and fertility treatments, appealing mainly to Middle Eastern patients and travellers from neighbouring SEA countries like Myanmar, Cambodia, Laos, and Vietnam," said the firm.
CIMB Securities said Malaysia's health tourism sector faces a potential risk from a slowdown in Indonesian arrivals, as the Indonesian government steps up efforts to retain medical travelers. These efforts include developing a 41-hectare special economic zone in Bali and simplifying employment processes for foreign-trained doctors.
However, the firm believes these measures are unlikely to pose a significant threat to Malaysia's health tourism in the near to medium term, given the much shorter travel time from Medan to Penang (50 minutes) compared to Medan to Bali (4 hours and 45 minutes).
CIMB has maintained an "Overweight" rating on the healthcare sector, with IHH Healthcare Bhd as its top pick, targeting a price of RM8.50.