Affin Hwang views the results positively despite a slight decline in the hospital operators due to seasonality elements which the firm noted has recovered since.
KUALA LUMPUR: Bright prospects are ahead for the healthcare sector due to growing demand for its products and services which translates into earnings resiliency, said Affin Hwang Capital.
This is after healthcare companies under the firm’s coverage posted earnings in the first half of 2023 (1H23) that fall within its expectations.
Affin Hwang views the results positively despite a slight decline in the hospital operators due to seasonality elements which the firm noted has recovered since.
Looking ahead, the firm pointed out that new competition should be limited primarily due to the sector being highly regulated.
Affin Hwang also said the inpatient volumes within the Malaysian operations have seen growth from July to August compared to the lows of the second quarter of 2023 (2Q23).
The firm cast “Buy” calls for IHH Healthcare Bhd and KPJ Healthcare Bhd as the sector’s top pick due to the companies’ cost optimisation efforts and ongoing plans to divest their loss-making foreign ventures.
“For perspective, the fasting month typically registers the weakest numbers for IHH. We see no risks in our earnings estimates for 2023E, and expect IHH and KPJ to grow year-on-year (YoY) from the ongoing strength in patient volumes,” it added.
Affin Hwang also named UMediC Group Bhd as a top pick within the healthcare sector due to its huge earnings growth potential derived from the company’s upcoming expansion plans into the manufacturing arm.
“Interest for its prefilled humidifiers far exceeds its capacity, as foreign manufacturers look to outsource production to relatively cheaper countries,” it said.
Meanwhile, the firm retained its “Hold” call on Apex Healthcare as near- term earnings growth will remain tepid.
Overall, Affin Hwang maintained “Overweight” stance on the healthcare sector.
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