• ASEAN countries – the preferred medical tourism (MT) destination. This report attempts to identify key investment ideas under the MT theme, given the region’s growing attractiveness to affluent travellers seeking premium medical treatment. Beyond value-for-money service offerings, the rise of qualified professionals, in our view, will continue to drive the MT industry in South-East Asia. This, in turn, should benefit prominent healthcare service providers in the region. Our preferred picks include Medikaloka Hermina (HEAL), Bundamedik (BMHS IJ, NR), IHH Healthcare (IHH), KPJ Healthcare (KPJ), Sunway Healthcare Group (non-listed), Raffles Medical Group (RFMD), Bangkok Dusit Medical Services (BDMS) and Bumrungrad Hospital (BH).

• Why ASEAN? According to Market.us, the global MT market was valued at USD13.1bn in 2023. Medical tourists visiting ASEAN countries accounted for a third of global medical tourists. That said, ASEAN is now home to renowned healthcare professionals with extensive medical expertise and are highly skilled in their respective fields. While state-of-the-art medical facilities play a part in attracting foreign patients, many hospitals and healthcare institutions in Asia have also obtained international accreditation ie Joint Commission International (JCI) – which upholds the highest standards in the industry, in adhering to globally recognised standards of quality and safety) – and this helps to build trust and confidence among medical tourists.

• Malaysia and Thailand are the biggest winners. Thailand is regarded as the largest MT revenue contributor in the ASEAN region, with an estimated USD850m in 2023. In contrast, Malaysia’s MT revenue amounted to USD444m (MYR2bn) while Singapore’s MT revenue was at an estimated c.USD250- 270m) in the same year. As the strong SGD has made Singapore a less attractive MT destination, we see Thailand and Malaysia benefiting from the shifting of interest from medical tourists seeking for value-for-money quality healthcare services – they will also benefit from visa-free travel to both countries.

• Cutting-edge medical equipment. To keep with the challenges in improving the quality of medical services, hospitals in South-East Asia are expected to invest heavily in medical devices (estimated market size of USD10.9bn in 2023). For instance, BH, via its partnership with IBM, has established the first IBM Watson – machine-learning artificial intelligence (AI) used for oncology work. Beyond Thailand, IHH has invested SGD78m in a proton therapy centre – the first in South-East Asia – at Mount Elizabeth Novena Hospital, to treat cancer patients. In the meantime, IHH Malaysia was the first in South-East Asia offering fibroblast activation protein inhibitor (FABI) PET/CT scans for precise tumour detection and treatment planning.

• ASEAN MT stock ideas. Our actionable ideas are largely centred on healthcare service providers that are prominent players in MT. Key proxies include Medikaloka Hermina, Bundamedik, IHH, KPJ, Sunway Healthcare Group, RFMD, BDMS and BH.

Source: RHB Securities Research - 14 Aug 2024