KUALA LUMPUR: KPJ Healthcare Bhd’s company issued warrants hit its limit up price of RM1.11 and tracked the gains from its mother share as the group is expected to benefit from a recovery in consumer sentiment this year.
The warrants, KPJ-WB, closed at its limit up price on heavy turnover of 1.9 million shares. It rose 29.5 sen to a new all time high. KPJ’s mother share also rose to a five-month high to close at RM4.25 on the same day.
Traditionally considered as a defensive sector, healthcare groups have seen their shares rebound in recent months following a substantial rally in the FBM KLCI and the broader market amid improved outlook on the recovery in consuemr sentiment this year. KPJ and IHH HEALTHCARE BHD are the top players in the sector and are also well-known for their strong dividend payouts.
With a growing aging population and due to the limited capacity of public healthcare providers, private sector players have also been eager to expand their presence by opening new hospitals and specialist centers.
“Going forward, we anticipate higher contribution from KPJ’s newly opened hospitals as well as improvements in contribution coming from its more mature hospitals.
“We are encouraged by the fact that KPJ managed to maintain its patient admissions number, which we think stemmed from the gradual recovery in consumer sentiment,” said MIDF Research in a recent report.
KPJ is notable for its significant market share in the local private healthcare industry and its growth aspirations. Following the opening of KPJ Pahang Hospital last year, the group expects to open its latest hospital, KPJ Perlis, by the second quarter of this year (2QFY17) which will have a total bed capacity of 190.
In addition, KPJ plans to expand nine of its existing hospitals and increase its total bed count by 527. As at FY16, the group’s total bed count stood at 2,929.
While the increased fixed costs as well as long gestation periods for the new hospitals may have put a dampener on KPJ’s earnings, its financial performance has been strong. For FY16, it reported a record net profit of RM155.88mil on the back of RM3.02bil in revenue, which is also an all time high.
The recent share price movements may also have been a short term reaction to the group’s share split proposal last week.
In an April 20 stock exchange filing, the group said the proposed split will result in an adjustment to the market price of the ordinary shares in KPJ and will result in the shares being more affordable, thus potentially making it more appealing to a wider group of investors.
The group has proposed a share split involving the subdivision of every one ordinary share in KPJ into four ordinary shares held on an entitlement date to be determined and announced later.
This means that the group’s share base will increase from 1.19 billion shares to 4.76 billion assuming that all outstanding warrants and employee share options schemes are fully exercised.
KPJ-WB, which expires on January 23, 2019, carries an exercise price of RM4.01 and a one-to-one ratio. This means that the warrants are trading at a 20% premium to KPJ’s mother share presently.
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