Vietnam shaping up to be key growth market for Singapore healthcare listcos: analysts

SINGAPORE-LISTED healthcare companies eyeing growth in the region could find a “sizeable opportunity” in Vietnam, analysts said, as growing healthcare expenditure and rising income levels fuel demand for private healthcare.

Taishu McLawhorn, senior analyst for Asia-Pacific healthcare at market intelligence provider FrontierView, noted that Vietnam’s public healthcare system has been overburdened, and faces issues ranging from staffing shortages to outdated infrastructure.

This has led to patient outflows to the private healthcare sector, he said.

In a recent review, FrontierView said prospects for investment in the sector are positive, largely due to the Vietnamese government becoming increasingly open to the private healthcare players.

To support the healthcare system, authorities have set a target for private hospital beds to account for 15 per cent of all hospital beds by 2030. The private healthcare sector currently represents less than 10 per cent of total hospital beds in the country.

“Strong government support coupled with a rapidly growing economy will help accelerate investment in Vietnam’s private sector in the coming years,” McLawhorn said.

World Bank data showed that Vietnam’s per capita healthcare expenditure jumped from US$19 to US$166 between 2000 and 2020.

Analysts believe that healthcare spending as a percentage of the country’s gross domestic product – which grew from 3.8 per cent to 4.7 per cent over the same period – will continue to rise.

Unlocking opportunities

Maybank Securities noted that Vietnam is set to become one of the fastest growing healthcare markets in South-east Asia – making it a prime target for Singapore’s healthcare players to expand into.

The local healthcare companies are also likely to be keen to amass more assets abroad as Singapore’s healthcare market is seen as too small and competitive.

Two listed healthcare groups last year announced acquisitions in the Vietnamese healthcare sector, which aimed to strengthen regional presence and grow revenue sources as the Covid-related activities tapered off.

Thomson Medical Group acquired Far East Medical Vietnam, the owner of FV Hospital, for US$381.4 million – marking its entry into the market.

Meanwhile, Raffles Medical Group – which already has operations in Vietnam – acquired a majority interest in American International Hospital, a 120-bed tertiary hospital in Ho Chi Minh City that was valued at US$45.6 million.

“We believe these major merger and acquisition (M&A) deals could help to unlock a sizeable Vietnamese opportunity,” Maybank analysts said.

Another Singapore-listed peer, IHH Healthcare , has also pointed to Vietnam as one of the markets it aims to enter.

Beyond borders

Shekhar Jaiswal, head of equity research at RHB Singapore, said Singapore companies tend to look for opportunities outside the country as the local public healthcare set-up has a “greater dominance”. Also, there is rising competition in the local private healthcare sector, which caps profit margins.

In addition, the medical tourism segment – a key revenue source for private healthcare players in Singapore – is now being challenged by cheaper peers such as Malaysia and Thailand, he noted.

Singapore healthcare players may find it difficult to compete with neighbouring medical hubs given the strength of the Singapore dollar in relation to regional currencies, Jaiswal said.

Furthermore, the analysts noted, overseas acquisitions are crucial for the private healthcare players to expand their presence and reach out to more customers.

DBS Group Research analyst Rachel Tan said that Singapore has seen an increasing number of foreign patients from Vietnam, given the growing affluence of its society.

“Having a presence in Vietnam is a two-prong strategy to build brand presence locally and potentially a referral point, especially in complex cases, to their Singapore healthcare services,” she added.

With ample room for expansion, analysts reckon the incoming Singapore healthcare players will not face competition pressure from the local incumbent private healthcare providers in the near term.

“Given the favourable demographics, improving income levels, and the need for the private healthcare system to supplement the public healthcare sector, we believe there are adequate growth opportunities for multiple private players in Vietnam,” said RHB’s Jaiswal.

Maybank Securities Singapore analyst Eric Ong said: “Singapore private operators will be able to add value to the Vietnamese healthcare industry, given their strong reputation and branding, and quality of medical services.”