Malaysia healthcare maintained a Market Weight rating as earnings are projected to outpace revenue growth over the next two years, according to a recent note from UOB Kay Hian.
Revenue and earnings outlook
Hospital revenue in the country is expected to increase by 12.4% in 2026 and 9.8% in 2027. Earnings growth is forecast at 13.6% for 2026 and 14.9% for 2027, suggesting profit margins could expand even as top‑line growth moderates.
The sector’s valuation sits at a price‑earnings multiple of 33.9×, slightly above its historical average of 32.7×. Large operators such as KPJ Healthcare and IHH Healthcare trade at 34.3×/31.3× and 33.3×/29.0× for 2026 and 2027 forecasts, respectively.
Risks to the outlook
UOB identified three near‑term risks. First, the depreciation of the Indonesian rupiah and a 6% service tax on foreign patients have raised costs for medical tourists from Indonesia, who represent roughly 70% of Malaysia’s health‑tourism base. The brokerage expects the impact to be limited because demand for healthcare is relatively price‑insensitive and Malaysia remains a cheaper alternative to Singapore.
Second, pharmaceutical cost inflation driven by the Middle East conflict has been uneven, with paracetamol prices jumping more than 50%. Hospitals have mitigated this by stockpiling supplies and securing early‑delivery contracts. Patients from the region account for under 5% of foreign healthcare visitors, keeping the overall exposure low.
Third, the upcoming Diagnosis‑Related Group (DRG) pricing scheme, set to take effect under the Base Medical and Health Insurance/Takaful framework in 2027, is expected to influence earnings gradually. Larger players such as KPJ and IHH are considered well‑positioned to handle the transition thanks to their scale.
Among other picks, Alpha IVF is projected to see earnings contract 7% in fiscal year 2026 before rebounding 23.8% in FY 2027 as new centres in Sabah, Manila, Johor, Northern Luzon and Jakarta reach breakeven. Duopharma Biotech is forecast to post profit‑after‑tax growth of 17.1% in 2026 and 8.6% in 2027, bolstered by a newly awarded government insulin contract worth $55.3 million (RM225 million).
UOB named KPJ as its preferred exposure within the hospital segment, citing a multi‑year growth runway from brownfield expansions. The broker’s note indicates that the sector’s earnings growth advantage could attract investors seeking higher returns without taking on excessive risk.
The sector remains resilient.
Overall, the outlook appears stable, with earnings growth expected to stay ahead of revenue expansion while the identified risks are deemed manageable. The report does not anticipate any abrupt changes to the earnings trajectory for the major hospital groups through 2027.