A file picture shows one of the hospitals under the KPJ group. - RONNIE CHIN/THE STAR
KUALA LUMPUR: KPJ Healthcare Bhd
's FY17 profit after tax and minority interests (Patami) grew 8% to RM165.5mil and beat Kenanga Research's and market net profit forecasts by 8% and 11% respectively, due to better-than-expected margins.
The research firm upgraded the counter from market perform to outperform and raised its target price from RM1 to RM1.05 based on the unchanged price-earnings ratio (PER) of 25x on FY18E revised earnings per share.
"We believe values are starting to emerge with the recent weakness in the share price following the just announced stellar FY17 result. The stock is current trading at 20-21x forward PER compared to its historical average of 26x," it said in its Tuesday research note.
Kenanga Research said FY17 revenue rose 7% largely due to higher averge revenue per outpatient and inpatient.
"In 2017, the new hospitals within the Group, such as KPJ Klang, KPJ Rawang, KPJ Pasir Gudang, KPJ Bandar Maharani and KPJ Pahang have shown tremendous improvement and contributed significantly to the Group’s revenue growth.
"This has resulted in an increase in profit before zakat and tax by 16% to RM249.2m in FY17, bringing FY17 PATAMI to RM165.6m (+8% YoY)."
Kenanga Research said earnings growth is expected to be driven by KPJ Perlis and KPJ Seremban, which are expected to commence operations by end 2017 and early 1Q18.
Brownfield operations include Taiping, Sri Manjung and KPJ Johor Bandar Dato Onn, expected to operate by end 2017 and early 2018.
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