PETALING JAYA: KPJ Healthcare Bhd
can expect a stronger second half of 2022 (2H22) that is anchored on an improving bed occupancy rate (BOR) and ongoing cost management.
The cost management is done by passing cost escalations on from higher PPE usage, nurse shortages and costlier medical supplies.
Maybank Investment Bank (Maybank IB) Research said KPJ also expects an additional 200 beds by the first quarter of 2023 (1Q23) through the expansion of KPJ Puteri, KPJ Penang and KPJ Klang, and the opening of the new Damansara Specialist Hospital 2.
Its asset rationalisation exercise is also underway, with the disposal of loss-making KPJ Indonesia and Jeta Gardens by the end of FY23, and potentially the Bangladesh operations thereafter.
Maybank IB Research said KPJ aims to establish six quaternary care centres within its portfolio of hospitals over the next two to three years, as well as set up 25 new ambulatory care centres by 2027.
Maybank IB Research believes all this could improve overall patient referrals, revenue intensity and penetration reach.
CGS-CIMB Research said it foresees total revenue rising further on a quarter-on-quarter (qoq) basis in the third and fourth quarters (3Q-4Q22) of 2022.
The group’s blended BOR has continued to improve and surpassed 60% in July-August (2Q22: 54%), with some of its hospitals currently having a BOR in excess of 70% (i.e., optimal level).
“This should help improve the profitability of its loss-making hospitals over time and it is hoped to have three of them turn around to become earnings before interest, tax, depreciation and amortisation profitable by year-end,” teh reserach house said.
UOB Kay Hian Research cut KPJ’s 2022 to 24 earnings by 25% to 19% to account for lower occupancy rates and operating margins.
It cited key downside risks as tightening of regulatory policy, delays in hospital openings and an inability to pass on higher operating costs to customers.
It maintains its “hold’’ call, but with a lower target price (TP) of 97 sen a share.
While it likes KPJ for being a beneficiary of positive structural trends and a gradual recovery in patient volume, its valuations appear to have been fairly priced in those prospects at this juncture.
CGS-CIMB Research has an “add’’ call on the stock with a TP of RM1.04 a share. It believes KPJ is a potential re-rating catalyst based on full earnings recovery from Covid-19, rising health tourism contribution and the sale of foreign operations.
Maybank retains its “buy” call with a TP of RM1.01 a share.
