Monday, April 18, 2016

ASEAN - Healthcare expenditure seen rising in four countries

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PETALING JAYA: Healthcare expenditure is expected to rise in this region due to the expanding middle class and income growth, according to RAM Ratings.

Rising healthcare awareness is also expected to be one of the key drivers of private healthcare expenditure.

“With the exception of Singapore, we expect Asean 4 (Malaysia, Singapore, Thailand and Indonesia) countries to experience rising income levels and increased spending on healthcare need,” it said.

However, it added that despite rising demand from a burgeoning middle class in the last decade, the overall healthcare expenditure in Asean has lagged that of developed countries.

Countries such as Japan and the United Kingdom spend twice as much per capita on healthcare, compared to Malaysia, Singapore, Thailand and Indonesia.

It added that global spending on healthcare is expected to increase steadily, rising an average 5.2% a year in 2014-2018 to US$9.3 trillion.

“Based on our observation, the major healthcare providers have mostly tapped the equity market or the banking sector for their funding requirements,” it said.

In 2012, IHH Healthcare Bhd raised RM6.3bil to partly fund its acquisition of a 60% stake in Acibadem Saglik Yatirimlari Holding AS (one of the private healthcare providers in Turkey).

On the other hand, all the debts of the major players take the form of bank borrowings.

“Given their generally healthy profiles, we expect these major players to also be able to competitively access the bond market,” it added.

RAM noted that IHH is a reputable player with strong regional franchise.

With an annual turnover of more than US$2bil, IHH Healthcare Bhd is the largest player in this region and reputedly the second largest globally by market capitalisation.

IHH’s overall operating profit before depreciation, interest and taxes (OPBDIT) margin of 24%-25% is slightly above its peers’ average as the broad margins in Malaysia and Singapore are partly diluted by thinner yields in Turkey.

“Since its initial public offering in 2012, IHH’s gearing ratios have hovered around a commendable 0.3 times,” it said.

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