One of the key drivers of the healthcare sector is the aging population theme in both Singapore and Malaysia. The proportion of citizens aged above 65 has been growing in both countries. For Singapore, almost a quarter of its citizens will be aged 65 and above by 2030. Meanwhile, the neighbouring Malaysia would also see the proportion of citizens, aged 65 and above, grow to 10.7 percent by the same time.
Problem Of Overcrowding At Public Hospitals By MBKE
That said, it appears that the public hospitals alone will not be able to attend to the healthcare needs of Singaporeans and Malaysians. According to personal finance research firm Value Penguin, Singapore’s public hospitals are close to its limits at the moment.
The average occupancy rate is near 85 percent while the average wait times peak to as high as 3.2 hours during the middle of the week. The same problem applies to Malaysia where there is a shortage of doctors at public hospitals. According to a survey done by “The Malay Mail”, 26 percent respondents reflected that treatment abandonments at public hospitals were due to long wait times.
Rising Affluence Driving Individuals Towards Private Healthcare
With the rising affluence of the population, more and more individuals are turning towards private healthcare providers to meet healthcare needs. This is particularly true in Malaysia where the private healthcare system is perceived to provide better service than public healthcare as they have more experienced doctors and shorter wait-times. Moving forward, MBKE thinks that the healthcare sector is worth investing in the long run.
Investors Takeaway: 2 Healthcare Plays To Ride On Aging Population Theme
Among the healthcare plays, there are two healthcare stocks that MBKE likes: Health Management International and Raffles Medical.
- Health Management International
According to MBKE, Health Management International will be a beneficiary of the aging population demographic shift and rising affluence. Both of Health Management International hospitals (Regency Specialist Hospital and Mahkota Medical Centre) are well positioned to benefit from rising incidences of chronic diseases (due to aging population) and the overburdened public healthcare system.
Besides that, MBKE also sees potential patient growth from mega projects as well as medical tourism. Mahkota Medical Centre has built a strong reputation in Indonesia for medical tourism.
In 2018, Health Management International acquired a 70-percent stake in StarMed (ambulatory care centre). According to the management, StarMed is well poised to capture the rising preference for day-surgeries for patients who prefer same-day discharge.
- Raffles Medical Group
Similar to Health Management International, Raffles Medical Group (Raffles Medical) is also supported by long term fundamental changes within Singapore’s demographics. MBKE also highlights that Raffles Medical’s domestic patient load is supported by its mid-range pricing strategy, as well as government subsidies (CHAS approved) and grants.
While the risk reward is currently not attractive, Raffles Medical remains on MBKE’s watchlist for a better entry point. MBKE also notes that the long term prospect of Raffles Medical remains positive.
Raffles Medical’s exposure to the Chinese healthcare market will drive its future growth, according to MBKE. The same aging population theme happening in Singapore and Malaysia is also happening in China. MBKE thinks that this will be favourable for Raffles Medical in the long term once it overcomes the problem of attracting doctors and patients that have an entrenched preference for public healthcare.
HOLD, TP $1.05
*As at the time of publication, Health Management International received an offer of $0.73 per share by its management and private equity firm EQT to take the company private.