Faber, KPJ up as investors turn to defensive healthcare shares

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KUALA LUMPUR (Dec 22): Investors bought shares of healthcare-related entities Faber Group Bhd and KPJ Healthcare Bhd, capitalising on the defensive nature of the sector amid market volatility.

At 4.22 pm, Faber rose 12 sen or 4.6% to RM2.72, with some 1.2 million shares done. KPJ was up six sen or 1.6% at RM2.70, with some 1.4 million shares exchanged.

For comparison, the FBM KLCI rose 28.61 points or 1.67%.

Alexander Chia, RHB Research Institute Sdn Bhd research head, said the defensive nature of healthcare services and its longer-term growth prospects on capacity expansion by operators, were good enough reasons to stay invested in selected healthcare stocks.

In a note today, Chia said this was further supported by growing awareness of health issues besides rising medical cost and affluence of the population.

“We like KPJ and Faber for their higher estimated return on equity (ROEs), cheaper valuations and solid dividend payouts,” Chia said.

He said KPJ and Faber were RHB's top picks for the healthcare sector. RHB has a "neutral" call on KPJ with a target price of RM3.67 and a "buy" recommendation on Faber with a TP of RM3.25.

Looking ahead, Chia said RHB expected Malaysian healthcare players to benefit from demand fuelled by favourable demographics in 2015. The sector is also seen gaining from synergies and medical tourism.

According to Chia, RHB expects hospital operators to look into acquiring strategic assets and smaller healthcare players to extract greater synergies and improve their competitiveness.

“JVs are also highly probable as players are able to operate on an asset-light model while growing in other areas,” he said.