In a similar vein to previous budgets, healthcare expenditure is expected to increase again, this time by 19.0% to S$11b. This will be directed towards supporting Public Healthcare Institutions and premium subsidies for MediShield Life.

With plans to expand capacity further, there would be higher expenditure for the construction of healthcare infrastructure such as the Sengkang General Hospital, National Centre for Infectious Diseases, National Cancer Centre and Outram Community Hospital.

We had previously mentioned that simply increasing bed base over time is not a sustainable model for any healthcare landscape, and as such, improving efficiency is one of the key objectives for hospitals.

In line with this view, the budget cited the adoption of robotics technology as an ongoing method to transform certain procedures in hospitals.

As the support towards automation initiatives continue to scale up, this leaves room for further enhancements on hospitals’ efficiency.

Facing this industry level transformation, we expect private hospitals to adopt new technology and implement productivity initiatives as well.

Fostering healthcare assurance has been a focus and this year in particular, the new Child Development Account (CDA) First Step grant for children can be used for healthcare needs.

We believe the long term story for the sector remains intact. Riding on this is our pick, Raffles Medical Group [BUY, S$4.72].

Source: OCBC Research - 28 Mar 2016