Healthy outlook seen for healthcare industry

PETALING JAYA: Analysts are positive on the Malaysian healthcare sector, driven by its resilient long-term structural growth drivers, positioning it as a compelling defensive play amid ongoing macroeconomic uncertainty.

Hong Leong Investment Bank (HLIB) Research has maintained its “overweight” stance on the healthcare sector for 2025, with a clear preference for the hospital segment.

“Also, we see further upside from a domestic-focused thematic play from an initial public offering-led re-rating, driven by the anticipated listings of Sunway Healthcare Group, expected in late-2025 or early-2026,” it said.

The research house has kept its “buy” rating on IHH Healthcare Bhd, with a higher sum-of-parts-derived target price of RM9.15 from RM9.06.

“The marginal upward revision reflects the latest market capitalisations of its India-listed Fortis Healthcare and Singapore-listed Parkway Life Real Estate Investment Trust, which have seen slight valuation uplifts.

HLIB Research has also upgraded KPJ Healthcare Bhd to a “buy” from “hold” with an unchanged target price of RM2.96, driven by the recent share price weakness that has improved its risk-reward profile.

It has, however, maintained its “hold” rating on UMediC Group Bhd, but lowered its target price to 31.5 sen from 40 sen.

This is based on a reduced target price over an earnings multiple of 15 times applied to its 2026 earnings per share estimate of 2.1 sen.

“The downward adjustment in valuation multiple reflects waning investor interest, following three consecutive quarters of earnings underperformance, and a muted outlook in the fourth quarter of 2025.

“Until earnings visibility improves, we expect sentiment to remain subdued,” it explained.

Meanwhile, MBSB Research, which has maintained a positive outlook on the healthcare sector, said the pharmaceutical market is fundamentally driven by robust demographic trends, which naturally increases the demand for healthcare services and medicines.

“The growing prevalence of non-communicable diseases such as cancer, diabetes and cardiovascular conditions, which require long-term medication and fuel sustained pharmaceutical consumption, is expected to continue to support all levels of the healthcare sector.

“Hence, we believe the growth in the pharmaceutical market will continue to grow in tandem with the expansion of investments in healthcare infrastructure (assets, accessibility and affordability),” it added.

It pointed out that while direct pharmaceutical exports from Malaysia to the United States might face immediate headwinds from tariffs, the broader impact on the healthcare sub-sector could come from indirect effects on global pharmaceutical supply chains and procurement costs.

“This would affect the affordability and availability of medicines within Malaysia for all citizens and healthcare providers.

“The Malaysian government and industry players are already responding by prioritising supply chain diversification and exploring domestic production enhancements to mitigate these risks,” the research house said.

It believes a multi-pronged approach involving government action, industry adaptation and consumer awareness will be crucial.

HLIB Research, meanwhile, viewed the government’s recent decision to implement the diagnosis-related group payment system, specifically for the upcoming “basic health insurance and takaful products”.

It said the targeted approach helps to improve accessibility for those priced out of existing insurance/takaful plans, while preserving the commercial viability of the private healthcare sector.