KPJ’s core earnings surge 71% in 4Q23

PETALING JAYA: KPJ Healthcare Bhd’s earnings growth is expected to be driven by its gradual expansion into the health-tourism segment, resilient domestic patient volumes and the government’s emphasis on inter-sectoral collaboration.

RHB Research said KPJ’s core earnings for the fourth quarter of 2023 (4Q23) surged by 71% year-on-year (y-o-y), underpinned by improved patient mix and hospital activity as well as higher revenue generated from its KPJ Penang, KPJ Puteri and Damansara Specialist 2 hospitals.

“During the quarter, KPJ registered impairment losses on property, plant and equipment (PPE) from Jeta Garden’s aged-care business (classified under discontinued operations in profit or loss) amounting to RM16.8mil, as well as RM7.6mil on the retirement village’s investment property in Australia.

“Both figures were excluded at core profit level. On a sequential basis, revenue was softer by 2% quarter-on-quarter (q-o-q) owing to seasonality effects.

“The board declared an interim dividend of one sen, bringing its full-year dividend payment to 3.05 sen,” the research house said in a report yesterday.

RHB Research said that for 4Q23, KPJ saw a 4% and 13% y-o-y growth to 763,033 and 94,504 in its total outpatient and inpatient visits recorded, respectively, bringing its total patient visits to 857,537, which was a 5% increase y-o-y.

“During the quarter, surgery cases were higher by 6% y-o-y on top of an extended period of inpatient days.

Malaysian earnings before interest, taxes, depreciation, and amortisation margin was lower by five percentage points q-o-q due to impairment loss on PPE,” the research house said.

RHB Research maintained a “buy” call on KPJ with a target price of RM1.86.

The research house said it still sees ample room for growth for KPJ despite the group’s recent share price rally.

“This is from the potential opportunities generated by its gradual expansion into the health-tourism segment, strategic move in upscaling existing hospitals into tertiary care centres (enabling KPJ to tap into more complex and uncommon procedures) and room for margin improvement from hospitals under a gestation period,” it said.

On the other hand, Hong Leong Investment Bank (HLIB) Research, which downgraded its call for KPJ to “hold” from “buy” with a target price of RM1.70, said KPJ is now shifting its focus to optimising existing hospital capacity and will be prioritising brownfield projects over new hospital openings.

This comes after KPJ completed a series of greenfield expansion before the Covid-19 pandemic.

“In the near term, KPJ aims to add 368 beds (up by 9.9%), bringing its total to 4,101 beds. The additional capacity will support KPJ’s organic growth in the near term.

“Furthermore, given the government emphasising inter-sectoral collaboration, KPJ’s extensive presence positions it well to benefit from the government’s initiative to procure more hospital care services from the private sector.

“Notably, KPJ secured a 52% share of the RM100mil budget allocated for such services during the pandemic,” the research house said.

Additionally, TA Research which also maintained a “hold” call on KPJ with a target price of RM1.50, said it remains sanguine on KPJ’s outlook as domestic patient volumes are expected to remain resilient.

The research house expects growth to be derived from medical tourism, ongoing efforts to recruit more consultants and expansion plans.

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