A hospital owned by JCorp. KPJ Ipoh Specialist Hospital. The group plans to build more hospitals to strengthen its current network of 26 private specialist hospitals in Malaysia and abroad.
KUALA LUMPUR: Maybank Investment Bank Research said KPJ Healthcare Bhd
’s first quarter results were “in line” but its interest cost is rising.
“Recovery in patient figures and higher occupancy rates at its Malaysian and Indonesian hospitals continue to support growth in earnings. However, increasing interest cost and losses from the Australian aged-care business could present downside risk to earnings. Maintain hold with an unchanged target price of RM4.60,” Maybank said.
The research house said KPJ’s first quarter core net profit of RM40mil represents 27%/26% of the house and consensus FY16 forecasts respectively.
Its earnings continue to be supported by the Malaysian and Indonesian operations. Excluding the provision for ESOS (RM6mil), the group’s normalised earnings before interest, tax, depreciation and amortisation (ebitda) of RM100mil met 26%/25% of Maybank’s and consensus FY16 forecasts.
“Also, the improvement in normalised ebitda margin we believe is due to positive contributions from hospitals undergoing gestation (Klang, Pasir Gudang, Rawang). KPJ declared a 1.8sen interim dividend,” it added.
Malaysia recorded revenue of RM708mil on the back of recovery in inpatient figures in first quarter to 73,000.
“We believe the higher than usual quarter-on-quarter growth was due to consumers delaying their spending on healthcare from fourth quarter 2015 (seasonally strong quarter) to first quarter 2016.
“Thus, we do expect inpatient growth to normalise in second quarter 2016. There was also improvement in overall patient figures at Bumi Serpong Damai, supporting Indonesia’s turnaround to profitability,” it added.
Despite the operational positives, Maybank said KPJ had a relatively higher net gearing of 77% compared to its peers. It said net interest cost had ballooned to RM18mil in first quarter from the increased borrowing to support its expansion.
“Our earnings and sum-of-parts target price of RM4.60 are unchanged for now. We believe the stock is fairly valued, trading at 29.4 times FY16 PER, close to its 5-year mean of 28.3 times,” it added.
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