KUALA LUMPUR, June 20 -- CIMB Securities Sdn Bhd has maintained an "Overweight" call on Malaysia’s healthcare sector premised on its defensive nature and resilient demand.
Its top pick is IHH Healthcare with a target price of RM8.50, backed by its leading market positioning and strong growth potential of its asset portfolio across its core markets in Malaysia, Singapore, Turkey, India and Europe.
CIMB Securities has a "Hold" recommendation on KPJ Healthcare (KPJ) with a TP of RM2.90.
"We make no changes to our earnings estimates for IHH and KPJ pending further updates on the implementation of the diagnosis-related group (DRG) system in Malaysia," it said in a note today.
The government has reiterated its commitment to implementing the DRG payment model aimed at enhancing transparency in medical charges and addressing rising healthcare costs on both public and private healthcare providers, with particular emphasis on the private sector.
"While we view the full-scale implementation of the DRG system as structurally negative for hospital operators under our coverage owing to potential downward pressure on margins and profitability, we believe the near-term impact will be minimal.
"This is premised on the expectation that the initial rollout will be confined to lower-value, lower-margin cases, such as mainstream and minor illnesses," it said.
It believes IHH and KPJ are better positioned to weather the transition, given their respective business models’ focus on providing differentiated, higher-end services to patients, coupled with case mixes that tilt towards more complex cases — segments that are likely to fall outside the scope of the DRG system in the early phases of its implementation.
CIMB Securities believes KPJ will be more exposed to DRG implementation concerns given that 98.1 per cent of its 1Q 2025 revenue was derived from its Malaysian operations.
-- BERNAMA
