PETALING JAYA: KPJ Healthcare Bhd
expects its earnings to gain momentum moving into the second half of this year (2H25) driven by better operational efficiencies from ongoing cost-optimisation efforts, analysts say.
Kenanga Research said the healthcare group’s management also guided for narrower losses in hospitals that are expanding, although the quantum of improvement may come in smaller.
For the first quater of this year (1Q25), KPJ’s key operating indicators were mixed versus 1Q24. Core net profit and minority interests of RM630mil was in line with analysts’ expectations.
Key metrics showing improvement included average revenue per inpatient, which was up by 10%, outpatient throughput surgeries and operational beds.
However, bed occupancy rates and inpatients were lower.
“We understand that losses in 1Q25 at its new hospitals have narrowed by RM5mil to RM6mil compared with 1Q24. Losses in FY24 at its new hospitals narrowed by between RM40mil and RM50mil to an estimated pre-tax loss of RM90mil to RM99mil,” Kenanga said following a 1Q25 post-results briefing with KPJ’s management.
According to the research firm, the healthcare group is optimistic about achieving a total 4,200 beds by the end of this year.
“Beyond this, it will add beds bringing total beds to over 6,000 in the next five years, largely via brownfield expansion which have already factored into our forecasts.
“The implementation of its central procurement is at the tail end with over 85% hospitals part of the system, which will enhance cost efficiency,” said Kenanga Research.
In terms of its price-earnings (PE) valuation, the research house said KPJ was trading at 36 times and 31 times forecast FY25 and FY26 earnings, respective.
Peers such Thailand’s Bumrumgrad Hospital and Bangkok Dusit hospitals are trading at FY26 PE of 17 times and 20times, respectively.
“Notably Bumrumgrad Hospital and Bangkok Dusit have consensus FY25 earnings before interest taxes, depreciation and amortisation margins of 38% and 24%, respectively, which is higher than KPJ’s. We maintain our forecasts, target price of RM2.50 a share and our ‘underperform’ call,” Kenanga Research added.
Meanwhile, CGS International Research (CGSI Research) reiterated its “add” call on the stock with an unchanged target price of RM3.35 a share as it expects patient volumes to recover for the remainder of FY25.
The research house said KPJ shared that it had embarked on an internal project to classify hospital by case-mix since 2023.
This allows KPJ to standardise resource allocation for different case-mixes and understand the cost structure across its hospitals.
Management also shared that none of its 30 hospitals had been removed from the panels of its existing insurance partners despite engagement to control healthcare costs in Malaysia.
Beside this, patient numbers at its newly opened Kuala Selangor hospital have been picking up.
