China’s reopening provides upside for Thailand’s healthcare sector: UOBKH

THAILAND’S healthcare sector may see some upside from China’s soon-than-expected reopening, especially in the areas of in-vitro fertilisation (IVF), Covid-19 screening tests and the sale of mRNA vaccines.

UOB Kay Hian has upgraded the sector to “market weight”. It believes China’s reopening on Sunday (Jan 8) would lead to a gain in 2023 sector earnings, mostly in the first half of the year.

The research team’s top pick is Bangkok Chain Hospital (BCH) and Chularat Hospital (CHG), which stand to benefit from providing Covid-19-related services for Chinese travellers. Between the two, it prefers BCH for its more attractive valuation.

It has a “buy” call and target price of 21.2 baht (S$0.84) for BCH and a “hold” call and 3.4 baht target price of CHG.

Other hospitals which stand to benefit from China’s reopening include Bangkok Dusit Medical Services and Bumrungrad Hospital.

Although Chinese patients are generally not the dominant nationality for Thai private hospitals, they can still provide a crucial upside for Thailand’s medical tourism due to China’s large population size. Chinese customers are also the primary targets of Thailand’s IVF centres.

Not only will the sector gain additional revenue from providing Covid-19 treatment for Chinese patients, it will also benefit from hospitals collaborating with hospitality companies to provide screening tests at accommodations instead of requiring travellers to visit hospitals.

Thailand is also in a “great spot” to generate additional income from selling mRNA vaccines to Chinese visitors, due to the country’s proximity and the inaccessibility of said vaccines in mainland China.

“Nonetheless, there are still no official details on this, and it is unclear whether Thai authorities will provide these services or authorise private hospitals to sell the vaccines,” the research team noted.

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That being said, the upside for Thailand’s healthcare sector from Chinese tourists is limited by flight availability and ticket affordability, despite huge pent-up demand for travel and China’s large population size. In Q1 2023, the majority of visitors will be wealthy travellers, with group tours only coming in at a later juncture.

“Lastly, the extraordinary contribution from Covid-19-related services may vanish if China subsequently abandons the RT-PCR test result requirement, which may be some time in Q2 2023 following declining infections,” UOBKH added.