Healthcare Stocks = Not Cheap

Sometimes I am wondering why on earth are Malaysian healthcare stocks (e.g IHH and KPJ)  trading at such premium valuation (at least in terms of relative earnings yield). As shown below, both IHH and KPH are trading at a relative lower earnings yield if compared to the general KLCI index:

KPJ vs IHH.png

Further, IHH trades at a higher P/E (i.e lower earnings yield) if compared to KPJ. There has been this consistent relative premium valuation associated with IHH if compared to KPJ:

KPJ vs IHH 2.png

My personal view (strictly personal): I will only consider the Malaysian healthcare stocks if they trade closer to current earning yield (i.e closer to 5.0%, perhaps?) of the broader KLCI market. The more expensive you buy a stock, the less return you are going to get in the future.

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