• We identified several key factors that attract people to seek healthcare in Asian countries, namely (i) the relatively lower medical costs, (ii) shorter waiting times for procedures, and (iii) top-notch medical services and facilities.

• Medical tourists can save between 20% and 90% on procedures compared to their home countries, with the depreciation of the Malaysian Ringgit also driving the growing influx of visitors.

• We are optimistic on KPJ’s earnings outlook as it is banking on Damansara Specialist Hospital 2 to drive its medical tourism segment. Meanwhile, we think IHH can capitalise on its extensive hospital network in Malaysia, Singapore, Turkey, and India to ride on rising presence of medical tourists in Asia.

• Maintain an OVERWEIGHT call on the Healthcare Sector with a BUY call on IHH (BUY, RM7.19) and KPJ (BUY, RM1.43)

Business Volume to be Supported by Medical Tourism

The healthcare sector has maintained its status as a significant national priority. It is worth to note that, in Budget 2024, the government has allocated RM41.2bn to the healthcare sector, representing a 13.5% YoY increase compared to RM36.3bn in the Budget 2023. Furthermore, there are also measures aimed to boost medical tourism, which we anticipate will be advantageous for private hospital operators such as IHH and KPJ Healthcare. Note that, the government has allocated RM350mn to enhance promotion and tourism activities.

Factors and Trends Shaping Malaysia Healthcare Travel

The World Health Organization (WHO) defines medical tourism as the practice of individuals traveling across international borders to receive medical treatment. To recap, Malaysia did not actively promote medical tourism until the 1990s. The tourism and healthcare industries have developed independently without a strong connection. However, the surge in tourists seeking medical treatments in Malaysia in 1997 led to the establishment of the National Committee on Health Tourism by the Ministry of Health (MoH).

Given the potential that the industry can contribute to the economy, Malaysia initiated a concerted effort to promote its wellness services to international travellers by establishing the Malaysia Healthcare Travel Council (MHTC) in 2009. The primary aim was to promote and facilitate the development of the Malaysian healthcare industry to access the global market.

Besides Malaysia, other Asian countries such as Singapore, Thailand, India, and South Korea have also recognised medical tourism as an industry to boost the economy. This is underpinned by its respective strength in various medical treatments and procedures. Notably, Malaysia received a profound recognition in cardiology treatments whereas South Korea is thriving in cosmetic surgery. The niche medical procedures for remaining countries are explained further in Table 1.

We believe that several key factors attracting people to seek healthcare in Asian countries, namely (i) the relatively lower medical costs, (ii) shorter waiting times for procedures, and (iii) top-notch medical services and facilities.

Source: BIMB Securities Research - 14 Nov 2023