Malaysian healthcare growth driven by demographics

 05-Jul-16, The Edge Markets

Recent data indicate accelerating business volume. Malaysian inpatient admissions appear to have finally turned around in the first quarter of 2016 after three consecutive quarters of decline, with IHH Healthcare Bhd (IHH) up 10% year-on-year (y-o-y) and KPJ Healthcare Bhd (KPJ) up 4% y-o-y.

Image: Bloomberg / Affin Hwang forecasts

The turnaround suggests that the drag on business volume from the implementation of the goods and services tax has finally worn off.

Growth remains robust in IHH’s other key home markets, with inpatient admissions up by 11% y-o-y in Singapore and up by 17% y-o-y in Turkey in 1Q16. Population growth is expected to slow considerably across IHH’s and KPJ’s key home markets, but the key datapoint to watch is the aged population (more than 65 years old), for which we estimate 1% to 4% compound annual growth rates (CAGRs) in Malaysia, Singapore, China, India and Turkey through 2050.

Hospital operators have laid out clear expansion plans based on this demographic trend; KPJ plans to add 1,645 beds (7% CAGR) and IHH plans to add 2,610 beds (5.5% CAGR) to their networks over the next five years.

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