Private healthcare operators’ earnings to display improvements in 2H18

As the contribution from newly opened hospitals grows, it will offset the high operating expenditures associated with the opening of the new hospitals.

KUCHING: Earnings of private healthcare operators are still expected by analysts to display further improvements from the second half of 2018 (2H18) onwards, on the back of organic growth.

As per 1H18, the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) expected revenue and earnings growth to be mainly driven by organic growth from existing hospitals as well as hospitals that were newly opened back in 2015-2017.

“In addition, we are also expecting the opening of new specialization wards in recently opened hospitals will contribute positively to the operators’ earnings as well,” MIDF Research said.

“Furthermore, as the contribution from newly opened hospitals grows, it will offset the high operating expenditures associated with the opening of the new hospitals.”

Aside from the organic growth from existing and new hospitals, MIDF Research also expected better revenue in 2H18 as the zero-rated goods and services tax (GST) will encourage inpatient admissions and outpatient visits to private hospitals.

Despite the GST being zero-rated for three months pending the re-introduction of sales and services tax (SST), the research arm believed this will nonetheless encourage the patients who have been delaying surgeries or treatments to come in and take advantage of the zero-rated GST period due to the increase in disposable income.

“Furthermore, with the current stable currency situation patients could also take advantage of lower medical consumable costs compared to last year.”

On another note, MIDF Research highlighted that the appointment of a new Minister of Health came with an announcement that the ministry would look into increasing the allocation for healthcare-related spending.

“Currently, Malaysia is spending about 4.5 per cent of its total gross domestic products (GDP) annually on healthcare and the new minister is looking into increasing it to six to seven per cent of GDP going forward.

“This is in-line with the spending of developed countries worldwide.”

Due to this, MIDF Research opined that UEM Edgenta Bhd (Edgenta) in its role as the healthcare support services (HSS) provider for the ministry of Health (MoH) would benefit from the increase in healthcare budget allocation as this would open new opportunities for maintenance of various MoH facilities going forward.

The research arm also opined that the current HSS contract with MoH is unlikely to be terminated by the new government as there is a scarcity in terms of companies that could provide HSS to MoH in Malaysia.

“Edgenta is currently maintaining 33 hospitals in the northern region of Malaysia until year 2025.”

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