Private hospitals set for higher patient volumes

PETALING JAYA: A stronger outlook for private hospitals is anticipated for the second half of 2026 (2H26) after a mixed second quarter (2Q26), supported by seasonally higher patient volumes, medical tourism, improving utilisation and a richer case mix.

BIMB Securities Research said hospital earnings are expected to improve by about 33% in 2H26 from 1H26, or 28% year-on-year (y-o-y), despite a mixed scorecard in 2Q26.

“The 2Q26 period is a mixed scorecard, but a much better exit rate. Pharmaniaga Bhd beat, Sunway Healthcare Holdings Bhd was in line and IHH Healthcare Bhd missed our expectations,” the research house said.

“Beneath the headline misses, operating pulse remains healthy. Hospital core earnings grew 27%-87% y-o-y in 2Q26 and 22%-48% y-o-y in 1H26, supported by higher patient volumes, improving bed occupancy rate and stronger revenue intensity.”

Aggregate hospital earnings improved 32% quarter-on-quarter and 38% y-o-y in 2Q26. Bed occupancy rates (BOR) for IHH and Sunway Healthcare improved to 69% and 73%, respectively, from 68% and 68% in the first quarter.

Average revenue per inpatient also rose by about 1% to 2% quarter-on-quarter and 7% to 16% y-o-y.

“Hence, demand is not a problem, but the speed of earnings conversion against expectations,” BIMB Securities said.

The research house said IHH should benefit from continued growth in Malaysia, Turkiye and India alongside a recovery in Singapore, while KPJ should gain from higher case intensity driven by its centres of excellence.

Sunway Healthcare, meanwhile, is expected to benefit from the ramp-up of newer hospitals, although BIMB Securities cautioned that its premium valuation leaves less room for execution disappointment. “Healthcare is now being valued as a growth sector rather than merely a defensive one, driven by rising utilisation, stronger revenue intensity and improving operating leverage,” it said.

“This has raised the earnings bar, with recent share price weakness reflecting growth falling short of elevated expectations despite healthy underlying fundamentals,” it added.

The research house maintained its “overweight” call on healthcare, with IHH as its preferred hospital exposure at a “buy” rating and RM10.42 per share target price.

It also maintained Pharmaniaga as its top pharmaceutical pick with a “buy” call and RM2.14 per share target price.

“In our view, the market has reset expectations without breaking the underlying growth story,” it said.