Resilient healthcare sector performance projected in 2015

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KUCHING: The healthcare sector performance has been predicted to be resilient underpinned by rapid growth in healthcare expenditure in line with the steady growth of total population in Malaysia along with aggressive business expansion by local healthcare players including KPJ Healthcare Bhd (KPJ) and IHH Healthcare Bhd (IHH).

According to the research arm of M&A Securities Sdn Bhd (M&A Securities), IHH and KPJ are boosting their bed capacity through expanding their hospitals by penetrating the foreign market.

It noted that KPJ has penetrated the Thailand market by acquiring a 23 per cent stake in Bangkok‘s Vejthani Hospital, meanwhile IHH a dominant market position in Turkey and Singapore (60 per cent stake in Acibadem and completed the construction of its fourth flagship hospital in Singapore and will open a hospital in Hong Kong by 2016) will make both players to experience healthcare expenditure growth rate around 13 per cent over next five years.

“Through the penetration of foreign market and expanding domestically, IHH is planning on adding more than 4,000 new beds, where more than 75 per cent will be in the group’s overseas hospital, an 80 per cent increase by 2017 from its current capacity of more than 5,000 beds,” the research arm said.

Furthermore, it noted that KPJ will add 1,800 new beds of which 1,500 beds will be from 10 additional hospitals.

Since the completion of the group’s acquisition of second Indonesian hospital, the research arm said that the 92-bed PT Khidmat Perawatan Jasa Medika in March 2013, the group has only ventured into Bangladesh via a 250-bed hospital on the outskirts of Dhaka.

On the healthcare expenditure per capita in Malaysia, M&A Securities said that it has grown tremendously over the last decades in tandem with the increased in Malaysia‘s total population.

It noted that the healthcare expenditure per capita powered a steady compound annual growth rate (CAGR) of four per cent from financial year 2003-2012 (FY03-FY12), anchored by the increased in Malaysia‘s total population from 24 million to 29 million (FY03-FY12).

The research arm added that the private expenditure contributed 47 per cent (RM671 million) out of the total expenditure (RM1.4 million) of healthcare in Malaysia as at FY12.

Nevertheless, M&A Securities is optimistic that the private healthcare expenditure per capita would increase in double digits driven by population is projected to reach 38 million people by 2040 from 30 million currently and aggressive expansion plans by the market players including KPJ and IHH.

According to the research arm, the cherry on the icing is the Government of Malaysia’s key role in developing the healthcare sector in sub-urban areas by opening the 1Malaysia clinics across the nation.

It noted that involvement of the government in the healthcare sector is to provide a quality healthcare and medical services to gain a positive outcome.

M&A Securities added that for 2015, a sum of RM23 billion or an increase of five per cent year on year (y-o-y) increase from the previous year’s RM22 billion has been allocated by the government for the healthcare management and development expenditure.

“The Government has built 260 1Malaysia clinics which have benefitted the citizen in reducing the treatment cost and facilitating health services access to treatment.

“The Government will add another 30 1Malaysia clinics in 2015,” it said.

Overall, M&A Securities maintained its ‘neutral’ call on the healthcare sector due to uncertain outlook post-goods and services tax (post-GST).

“Sentiment may also be weighed by the on-going subsidy rationalisation plan deployment,” it added.

Notwithstanding that, the resesearch arm said that the sector performance may be uplifted by catalysts such as increase in population residing in urban areas, increase in aging population and participation of Malaysian Government in medical tourism.