KPJ proposed to dispose its 80% stake in PT Khidmat Perawatan Jasa Medika, to Mr. Irfan Jasri and Ms. Annie Trisusilo for a total of c.RM28m. We are positive on the news. As we understand, the proposed disposal is a part of a wider restructuring exercise that would involve KPJ’s hospital assets in Indonesia and will benefit KPJ, as KPJ will not be further burdened by the regulatory requirements. The disposal is expected to be completed within 24 months and the proceeds will be use to continue on the Indonesia’s restructuring plans, which remain unclear at this juncture. Net gearing is estimated to fall from 80.2% to 78.8% on a proforma basis. We maintain our forecasts pending completion of the proposal. Maintain BUY with unchanged SOP-derived TP of RM1.09.
NEWSBREAK
KPJ had entered into 2 separate Share Sale and Purchase Agreements with Mr. Irfan Jasri and Ms. Annie Trisusilo for the proposed disposal of its 80% stake in PT Khidmat Perawatan Jasa Medika (KPJM). The disposal, totalling to IDR96bn (c.RM28m), involves the sale of 15,999 shares to Mr. Irfan, and the sale of 1 share to Ms. Annie.
The proposed disposal is part of the restructuring of KPJ hospital operations in Jakarta, Indonesia and has been necessitated due to the difficulty encountered by KPJ to comply with the licencing and regulatory requirements imposed on foreign operators. KPJM operates a specialist hospital, RS Medika Permata Hijau, located in Jakarta Barat, Indonesia.
HLIB’s VIEW
Positive. We are positive on the news. As we understand, the proposed disposal is a part of a wider restructuring exercise that would involve KPJ’s hospital assets in Indonesia. The objective is to attain local operator status so that KPJ will not be further burdened by the regulatory requirements. KPJ will only be disposing the stake in the operating company while maintaining ownership on the specialist hospital, RS Medika Permata Hijau.
Fair. The disposal price was arrived based on 2x NTA value of KPJM as at 30 Jun 2020. We opine the value is fair, as peers’ P/B are trading at an average of 2x as well. The value was agreed between the 2 parties on a “willing buyer-winning seller” basis.
Expected completion. The proposed disposal is expected to be completed within 24 months.
Utilisation. The proceeds will be use to continue on the Indonesia’s restructuring plans, which remain unclear at this juncture.
Gearing. With the disposal, KPJ’s net gearing is expected to fall from 80.2% (as at 1Q20) to 78.8% on a proforma basis.
Forecast. We maintain our forecasts pending completion of the disposal.
Maintain BUY, TP: RM1.09. We maintain our BUY call with unchanged SOP-derived TP of RM1.09.
Source: Hong Leong Investment Bank Research - 3 Aug 2020
https://klse.i3investor.com/blogs/hleresearch/2020-08-03-story-h1511501024-KPJ_Healthcare_Disposal_of_80_Stake_in_Indonesia_rsquo_s_PT_KPJM.jsp
