Strategy Outlook- Malaysia 2014
“On Steady Path”
Having grown by leaps and bounds since the last few years, it is time for the sector to consolidate and fill up all the capacity that has been built. With no black swan that could temper the sector‟s steady growth, we are NEUTRAL on the sector in 2014.
Being recession proof industry has its advantage as proven in the players steady net income increase by 22% y-o-y in FY13. With demand not expected to be dented following the rising cost of living, we expect the sector‟s net income growth to continue accelerating and growing by 3% y-o-y in 2014, proving that the sector is a safe bet during the good and bad times
Future increase in bed capacity. IHH and KPJ are boosting their bed capacity, with IHH planning on adding more than 4,000 new beds, where more than 75% will be in the group‟s overseas hospital, an 80% increase by 2017 from its current capacity of more than 5,000 beds. 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 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.
Expanding widely. Besides that, KPJ and IHH also have expanded its businesses to penetrate the foreign markets. KPJ has acquired 23.4% stake in Bangkok‟s Vejthani Hospital to gain entry into the Thai market. Meanwhile, IHH has a dominant market position in Turkey and Singapore (60% stake in Acibadem and completed the construction of its fourth flagship hospital in Singapore and will open a hospital in Hong Kong by 2016), which will make both players to experience healthcare expenditure growth rate around 13% for over next five years.
Long term growth. IHH heavy investments today would produce a positive returns in the future by giving time to digest its additional capacity and focus on improving returns to shareholders, where they will start paying dividend to shareholders in year 2014. KPJ is prudent in their expansion plans which will ensure future growth in the market and seal their market share of 25%, making them the leading domestic private healthcare service provider.
The growth factors. With the surge in medical insurance, aging population, participation of Malaysian Government in medical tourism and growing healthcare expenditure, we believe that the healthcare industry in Malaysia will continue to grow stably.
Government role in healthcare. Involvement of the government to provide a quality healthcare and medical services will result in positive outcome for the healthcare sector. In the Budget 2014 speech, the government will allocate RM22 billion for the health sector. Addition to the 1Malaysia clinics, approximately around 50 clinics will be constructed in 2014. As to date, about
234 1Malaysia clinics have established. Meanwhile, the National Cancer Institute will start its operation early next year.
Beds shortage. Meanwhile, the shortage number of beds in public hospital will definitely give an opportunity for private healthcare company expansion and investment. By 2015, there will be approximately 20 new private hospitals with additional of 5,000 beds for private hospitals. Currently, KPJ dominated the market share of private beds by 32% followed by IHH with 22% from total of 8, 943 beds in private sector
Population rising. Increase in population residing in urban areas will encourage awareness for healthcare which will benefit the private sector the most as most big company will have medical insurance coverage for their employees.
Contribution to the GNI and creating job opportunities. The Healthcare National Key Economic Area (NKEA) prepared by the Malaysian government, stated to contribute to the Gross National Income (GNI) and create job opportunities in year 2020 by RM5.53 billion and 24,000 jobs in the healthcare sector.
Regardless of being second best to neighbor, Singapore and Thailand, Malaysia is quickly becoming a popular destination for health travelers, boosting the country‟s image on the medical tourism front in Asia. Over the past three years Malaysia has seen more than 20% growth in health tourism, generating almost RM600 million in revenue last year which made Malaysia as one of the fastest growing segments over the past few years. The positive growth is due to MHTC's role in providing technological platform for web-based medical and health-related information to a global audience
A large number of Malaysian private hospitals such as KPJ and IHH are actively participating in health tourism which provide treatment like predominantly cardiac, cosmetics, ophthalmology, dental, diagnostic services (MRI and CT Scans) and also orthopedic. Nonetheless, Malaysian government is optimistic about the healthcare travel industry in the country, targeting 20% per annum revenue growth for the period 2011 to 2015.
The healthcare programmes and incentives will not only benefit Malaysian patients and those who come abroad for treatment, but also targets to attract foreign investors to our country to venture into the healthcare manufacturing and services sector. The cost of living in Malaysia is very affordable and this was proven with the increasing number of foreigners participating in the Malaysia My Second Home programme.
Source/Extract/Excerpts/来源/转贴/摘录: M & A Securities
Publish date: 07/01/14