MIDF Research noted KPJ aims to increase its bed count by approximately 400 beds by the end of 2024.
PETALING JAYA: KPJ Healthcare Bhd
’s move to optimise its existing assets to increase bed occupancy rate (BOR) is seen as a positive move, as it enhances cost-efficiency by reducing the need for substantial financial investments.
The approach is also time-saving and less risky compared to acquiring new assets, while enabling the group to adhere to sustainability practices, MIDF Research wrote in its report yesterday.
Further, the strategy is beneficial in boosting employee morale, which could lead to a better work environment, the brokerage pointed out.
MIDF Research maintained its “buy” call on KPJ, with an unchanged target price of RM2.54.
“We opine that KPJ still has the capacity for expansion and subsequently increase its BOR as targeted. However, we also noted that the optimisation of existing assets and minimising investment risks may not be the best option in the long run,” MIDF Research said.
The downside risks to this, it said, include diminished returns after resources operates near maximum efficiency, ageing infrastructure leading to higher maintenance costs, and limited scalability.
“Nevertheless, we believe KPJ has the capability to strike a balance between the benefits and risks, and thus, mitigate accordingly in its five-year strategic plan,” it said.
KPJ recently reiterated its focus in optimising its current resources, while it continues to seek new assets, and is actively looking for merger and acquisition opportunities, both greenfield and brownfield.
“While there are opportunities of new assets within the sector – notably the Ramsay Sime Darby Hospitals and Island Hospital in Penang – we believe KPJ is comfortable with its financial standing and will continue focus on more affordable and attractive market capital opportunities,” MIDF Research said.
KPJ achieved a BOR of 60% in the first quarter of 2024, nearly the full-year rate of 2023.
MIDF Research noted KPJ aims to increase its bed count by approximately 400 beds by the end of 2024.
“We believe that with the current expansions of its existing hospitals in Malaysia in tandem with climbing healthcare services demand, KPJ is able to achieve the feat,” it said, adding it saw room for growth in the health tourism segment.
Health tourism contributed to about 5%-6% of KPJ’s total business in 2023.
MIDF Research said KPJ would likely consider increasing the percentage, considering that the Malaysia Healthcare Travel Council had recorded RM2.3bil in revenue in 2023, with the group contributing around RM190mil.
“We view the expansion projects as timely to leverage on the foreign patient market, while also providing opportunities to improve operations and integrate advanced technology in its hospitals,” MIDF Research said.
