The research outfit has identified IHH Healthcare Bhd and KPJ Healthcare Bhd as major beneficiaries should the national health insurance scheme be implemented by the government.
In June, the health ministry tabled the health white paper in the Dewan Rakyat, which detailed strategies for healthcare system reforms over the next 15 years.
The white paper highlighted that the public health sector’s dependency on a single source of funding is unsustainable amid rising medical costs and evolving demographics.
It also suggested a progressive contribution scheme to diversify funding sources for public healthcare services in the country.
IHH and KPJ were both rated “outperform” by Kenanga with a target price (TP) of RM7 and RM1.50 respectively.
Kenanga said the potential insurance scheme could lead to a substantial increase in patient demand for private healthcare services and could have a significant impact on the financial performance of IHH and KPJ.
Furthermore, it has raised the financial year 2024 (FY2024) earnings forecast for IHH and KPJ by 12% and 25% respectively.
Additionally, the research house said it may revise their TP upwards by 7% to RM7.50 for IHH and 25% to RM1.90 for KPJ, based on the same valuation basis.
While recognising that a comprehensive overhaul of the healthcare system may take time to materialise, Kenanga believes these counters could experience a positive revaluation once the government demonstrates a strong commitment to implementing such reforms.
Apart from potential systemic reforms, Kenanga is also positive on the outlook of both companies due to their pricing power, a growing elderly population and increasing affluence.
“We also like IHH and KPJ for their market positions, with IHH’s presence in Malaysia, Singapore, Turkey and Greater China, while KPJ has a network of 28 private hospitals in Malaysia compared to IHH’s 16,” it said.
As at 10.59am, IHH’s share price was down by one sen (0.17%) at RM5.96, while KPJ’s was unchanged at RM1.19. Each had a market capitalisation of RM52.49 billion and RM5.43 billion respectively.