RESEARCH HOUSES REITERATE 'OVERWEIGHT' CALL ON HEALTHCARE SECTOR

KUALA LUMPUR, April 23 (Bernama) -- Kenanga Research has maintained its “Overweight” call on the healthcare sector as global healthcare expenditure is projected to grow at a compound annual growth rate of 3.5 per cent by 2026, underpinned by rising affluence and ageing populations.

In a note, the research house said the demand for healthcare, a basic necessity, is inelastic despite high inflation.

“For the players, we expect both domestic and international patient throughput to continue to grow while revenue intensity improves, driven by higher yields from a case mix with more acute cases,” it said.

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This will be aided by better operational efficiency, cost optimisation and overhead absorption, thanks to a gradual ramp-up of new beds.

“Similarly, we see robust sales of pharmaceuticals and over-the-counter (OTC) drugs backed by increased health awareness,” said Kenanga Research.

Echoing a similar view, RHB Research expects the private healthcare sector to record stronger numbers this year, predicated on organic expansion strategies, visa-free entry into Malaysia for tourists from China and India, a growing number of non-communicable diseases, rising health awareness among consumers, and a rapidly ageing society.

“While the healthcare sector generally has defensive attributes, we continue to advocate for investors to lean towards domestic-centric names given better earnings stability,” it said.

Meanwhile, the pharmaceutical segment should see a robust recovery in the second half of 2024 (2H 2024), underpinned by a pick-up in consumer healthcare and OTC product segments, as well as benefitting from the spillover effect of rising hospital activities and a surge in foreign tourist arrivals.

“We also expect a pick-up in export sales post-reopening of borders, as well as the improvement in economic activities in 2024 to benefit the manufacturers of generic medicines that we cover,” the research house said.

For healthcare service providers, RHB Research expects the first-quarter 2024 performance to be muted due to the seasonally shorter working months that coincided with the Lunar New Year celebration.

Nonetheless, results for 2H 2024 and beyond should continue to hold up steadily, underpinned by the organic patient footfall growth, as well as the spillover effect from the influx of foreign patients helped by the implementation of visa-free travel arrangements with China and India.

-- BERNAMA