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Healthy outlook for hospital business after solid Q1
Hospital business continues to glow despite domestic economic slowdown, with a strong first-quarter financial performance and a healthy outlook on the back of rising health awareness from the countryâs growing middle-class population and the governmentâs universal healthcare program
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Hospital business continues to glow despite domestic economic slowdown, with a strong first-quarter financial performance and a healthy outlook on the back of rising health awareness from the country's growing middle-class population and the government's universal healthcare program.
Three major hospital operators listed on local bourse ' Siloam International Hospitals, Sarana Meditama Metropolitan and newly listed Mitra Keluarga Karyasehat ' all reported double-digit net profit growth in their January-March financial reports and have all prepared ambitious expansion plans for the coming years.
Lippo Group-affiliated Siloam led first quarter growth with its bottom line growing by around 28 percent year-on-year to Rp 34.53 billion (US$2.61 million) in between January and March this year, followed by Sarana Meditama ' which operates the OMNI hospital chain ' that booked 18.32 percent growth in net profits to Rp 13.82 billion.
The Kalbe Group's Mitra Keluarga registered Rp 145.08 billion in net profits, having grown by around 15 percent on an annual basis.
Armando Marulitua from Danareksa Sekuritas said he believed the sector would remain lucrative over the medium to long term, underpinned by the country's lagging healthcare spending, underdeveloped healthcare infrastructure, increasing income levels and the implementation of the national health care insurance (JKN) program ' which is believed to open more access for citizens to receive treatments in hospitals.
'Referring to first-quarter results, most healthcare companies reported healthy earnings growth, becoming one of the best performing sectors in the JCI [benchmark Jakarta Composite Index]. This also validated the defensive characteristic of the sector that can weather unfavorable economic conditions,' he said in published research.
'In 2015, we believe the implementation of national healthcare insurance will be more pronounced, which will support the healthcare sector's performance this year.'
Desmon Silitonga from Millenium Danatama Asset Management said that the domestic hospital business might grow around 20 to 30 percent this year supported by Indonesia's growing middle-income bracket, which have led companies to make major expansions.
'With such a huge population, hospital penetration in Indonesia is still relatively low compared with peers in the region, thus leaving a lot of room for expansion,' Desmon said.
Indonesia, home to 250 million people, only has around 230,000 hospital beds for regular patients ' according to a recent report by kompas.com. The WHO says that ideally, there should be one bed for every 1,000 people, meaning the country is still short 20,000 beds.
Siloam, which currently has 20 hospitals operating nationwide, has recently announced that the company is planning to more than double the figure and have 50 hospitals operating by 2017.
The company, according to its recent public expose, already secured 24 sites for the new hospitals, 12 of which ' including ones in Bau Bau (Southeast Sulawesi) and Sorong (Papua) ' are already being constructed. It plans to acquire six more hospitals in the next three years.
Meanwhile, Sarana Meditama has started construction for its third OMNI Hospital in Cikarang, Bekasi, West Java, late last month, which is expected to be operational in the first quarter of next year, the company's press statement revealed. The company has also planned to make its first move outside Java by starting a project in Balikpapan, East Kalimantan.
Mitra Keluarga is planning to have seven new hospitals operating by 2019 in addition to its current 11 hospitals, and is on its way to having one new hospital in Kalideres, West Jakarta, this year ' after concluding its successful initial public offering that generated Rp 4.45 trillion, the biggest in the country's stock market in four years.
Mitra Keluarga saw its share value rise by 56.5 percent from its March IPO price to Rp 26,600 a piece on Tuesday, while shares of Siloam increase by 7.3 percent to Rp 13,700 per share this year ' easily exceeding stock market index growth.
