Booming Asian Healthcare: IHH Healthcare Berhad

Heard of Medical Tourism? Its a growing phenomena with an estimated 36% of all medical operations conducted on citizens outside their country of birth. Yes, some of this total will include those resident outside their country of birth, but a large component will be those actively seeking treatment in low-cost areas. One such area where medical tourism is hugely prevalent is South-East Asia. Buy into this trend now while it still remains low-key.

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The growth of the healthcare industry is not just about the medical tourism trend. It is also about the emerging middle-class that is able to afford better healthcare, not just as a necessity but also to improve their quality of life and for cosmetic vanity. Furthermore, with aging populations in some parts of Asia, healthcare focused on the elderly is a factor. Populations are growing extremely fast in most of Asia, which is a boon for the industry and there is a changing disease profile in Asia which will require greater investment in the healthcare industry. Not only has healthcare expenditure in most countries globally doubled in the past decade, the room for growth in developing countries is much greater as average spending per capita is a fraction of that in developed nations. Malaysia spent US$368 per capita on healthcare last year compared to US$4775 in Australia.

With such a strong potential growth trend combined with the non-cyclical characteristic of the healthcare industry, investors should look for private healthcare providers that already have a well-established brand and efficient management. These are the companies that will benefit from the continued development of healthcare in Asia over the next 30 years. The major threat to any company in this sector is spiralling cost and therefore effective management is necessary to control costs in order to maintain profitability in a sector that is burdened with costly technological innovations and manpower shortages. Furthermore, private companies with good networks of partnerships across borders will benefit from cross-referrals and easier market penetration – the value-add for an investor.

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One company on my radar is IHH Healthcare Bhd - a listed company on Malaysia’s stock exchange, the Bursa Malays, since last year. Its share price currently trades at MYR3.660 and increased 32% from last June. IHH Healthcare is one of the world’s largest listed healthcare providers with healthcare operations in Singapore, Malaysia, Turkey, China, India, Hong Kong, Vietnam, Brunei and Macedonia. This is a company with diversified geographic exposure and with an integrated healthcare network consisting of 4,900 licensed beds in 30 hospitals and 60 medical centres. It also has a great future evidenced by three hospitals opening in Malaysia in 2013, one in India, one in Vietnam, and one in Shanghai in 2014. IHH also won a US$645 million contract to build Hong Kong’s first private hospital, slated to open in 2016. In addition, they founded Malaysia’s first private healthcare university, IMU, to offer local and foreign medical, dental, pharmacy, nursing and health science programmes. If I were you, I would buy IHH now at its current share price of MYR3.660 and hold long-term for very strong gains, both from the currency exposure as the MYR gets stronger and from the capital appreciation.