In a sector update today, the research house highlighted that hospital operators under its coverage have experienced higher patient volume, indicating a strong and steady demand for their services.

The growth was witnessed even during the festive season in the first quarter of 2023, noted HLIB.

“With the increased allocation to the health ministry, Pharmaniaga Bhd, UmediC Group Bhd and UEM Edgenta Bhd are poised to benefit from enhanced procurement of drugs, consumables, and medical equipment, as well as potential work orders and equipment maintenance opportunities,” it said.

The research house maintained its “overweight” call on the sector due to its defensive characteristics and resilience, the note stated.

Among hospital operators under its coverage, HLIB has identified KPJ Healthcare Bhd as its top pick with a “buy” call and target price of RM1.50.

The group, said HLIB, has strong prospects due to its defensive qualities, ongoing expansion of current hospitals, growing medical tourism contribution and divestment of unprofitable Indonesian assets.

“Pharmaniaga Bhd is the only healthcare company in our coverage with a ‘sell’ rating, primarily due to the uncertainty surrounding its timeline for the lifting of its PN17 (Practice Note 17) status,” HLIB said.

Pharmaniaga was classified in the PN17 category in February this year after it posted a RM664.39 million net loss in the fourth quarter of FY2022.

At market close today, Pharmaniaga’s share price was up 0.5 sen or 1.39% at 36.5 sen, giving it a market capitalisation of RM478.23 million.

Meanwhile, KPJ Healthcare’s share price was flat at RM1.11, giving it a market capitalisation of RM5.02 billion.