KUALA LUMPUR: Public Investment Bank has maintained its Neutral view and and target price of RM1.20 KPJ Healthcare Bhd
, following a positive outlook on its expansion plans and prospects.
"Our valuation is premised on 25x PE pegged to our FY18F EPS of 4.1 sen. Though we are upbeat on KPJ’s growth prospects supported by its ongoing projects, we remain cautious on possible delays or hurdles in project executions and longer-than-expected gestation period of new hospitals.
"We also keep an eye on margin sustenance through price revisions, versus maintaining patient volume trends at Group level."
Patient numbers have been boosted by KPJ's newer hospital which have seen robust volume growth. KPJ expects patient volume to be sustainable year-on-year in H2 2017 owing to promotional efforts and a higher number of cases in the new hospitals.
Drug and medicals costs and price revisions will likely be forthcoming by year end owing to the weakened ringgit. However, KPJ said this will be implemented delicately due to the potential impact on patient volume.
The group's loss-making Jeta Gardens may be sold off, according to PublicInvest Research.
"If the disposal is successful, we believe it would allow KPJ to relieve itself from possible incurrence of further losses in addition to redirecting capital expenditure commitments to other rewarding investments," it said.
New projects in the pipeline include KPJ Perlis, which should open in December this year. Greenfield projects include KPJ Bandar Dato' Onn and KPJ Miri, both scheduled to open in mid-2018.
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