PETALING JAYA: KPJ Healthcare Bhd should remain resilient in the near term, particularly with a review on its financial discipline and public-private partnerships.
Additionally, the National Recovery Plan (NRP) and Budget 2022 are expected to benefit the group in the future, with major focus on increased access to healthcare services, increased use of digital healthcare systems and promising bed occupancy rate and patient visits, admissions and surgeries.
However, given that earnings for the group’s first nine months of financial year 2021 (FY21) had dropped below expectations, MIDF Research is revising its FY21 and FY22 estimates downward by 65% and 70%, respectively.
The research house, which maintained a “neutral” call on KPJ, is also revising its target price lower at RM1.06 from RM1.12 previously.
Despite the downward revisions, the research house said in its report that “we continue to view KPJ positively for the remainder of the year, particularly on its local operations and initiatives to fully adopt and adapt digital medical technology.
“The previous lockdowns had posed the expected outcome including increased operating cost.”
MIDF Research noted that KPJ will continue to operate in a challenging environment for the rest of FY21.
Activities have been considerably hampered by lockdowns imposed in response to the resurgence of Covid-19.
In the near term, hospital activities are expected to recover slowly due to patient aversion to visiting hospitals.
However, as business activities resume and restrictions in each state are eased in accordance with the NRP, hospital activities are expected to gradually improve towards FY22.
It added that KPJ will stay watchful and focused on delivering its services while strengthening its cash position to maintain its resiliency, including increasing the significant adoption of digital technology in its operations.
Through a review of cost structures and resource deployment, the group will continue to put additional effort into cost minimisation.
More savings through central procurement strategies on services, pharmaceutical goods and equipment are envisaged in the future, which will help its bottom line.
Meanwhile, TA Securities, in its report yesterday, made no changes to its FY21-FY23 earnings estimates for KPJ.
The research house, which has a “sell” call on KPJ, is maintaining the stock’s target price of RM1.05 per share pending the group’s analysts briefing.
On KPJ’s outlook, TA Securities said: “Going into fourth quarter, we believe patient numbers as well as elective surgery cases will pick up gradually following the easing of restrictions in each state and full reopening of economic sectors in October.
“The management remains cautiously optimistic and continues to engage with the Health Ministry in decanting patients to KPJ Hospitals on a longer-term concession agreement.”