KPJ (5878) - KPJ Healthcare - Healthy ending
Target RM4.20 (Stock Rating: HOLD)
KPJ’s FY14 core net profit made up 97% of our full year forecast and 99% of consensus. It declared a dividend of 2.6 sen per share, bringing YTD DPS to 7.5 sen, higher than our estimated full year DPS of 6 sen. We fine tune our FY15 EPS but raise FY16 EPS by 23% to reflect lower hospital start-up losses as some of its major hospital projects have been postponed. This raises our SOP-based target price to RM4.20. KPJ remains a hold. We prefer IHH for exposure to the hospital sector.
Key result highlights
KPJ’s core net profit rose 19%yoy to RM33m in 4Q14, due mainly to higher earnings contribution from its hospitals in Malaysia. Net profit of its Malaysian operation rose 79% yoy to RM50m on the back of stronger demand and lower losses at the new hospitals. Its aged care facility in Australia also showed improved results, albeit still in the red, as losses narrowed by 48% yoy to RM1.7m. KPJ’s Indonesian hospitals almost reached break-even, thanks to higher revenue which was 16% higher than last year.
Outlook for 2015
We expect the implementation of GST by April 1 this year will erode the purchasing power of Malaysians and increase the cost of private healthcare. These may dissuade some patients from seeking treatment from private hospitals. Our recent check with the company partially confirmed our view as it has already raised charges in anticipation of higher operating cost post GST. We believe 2015 will be a tougher year for KPJ to attract patients, especially those who currently seek treatment from heavily-subsidised public hospitals. Nonetheless, we still expect its earnings to grow 11% due to lower start-up losses. Three out of its five loss-making hospitals in Malaysia should generate positive EBITDA this year.
Reviewing hospital projects
We gathered that KPJ is currently reviewing the timeline for its new hospital projects. Among the hospitals that are likely to be postponed are the ones in Bandar Dato Onn, Iskandar Malaysia, and Klang. These two projects were initially scheduled to be completed by 2016. In view of the deferment, we lower our start-up loss estimates and raise our 2016 EPS by 23%.
Source: CIMB Daybreak - 02 March 2015
Target RM4.20 (Stock Rating: HOLD)
KPJ’s FY14 core net profit made up 97% of our full year forecast and 99% of consensus. It declared a dividend of 2.6 sen per share, bringing YTD DPS to 7.5 sen, higher than our estimated full year DPS of 6 sen. We fine tune our FY15 EPS but raise FY16 EPS by 23% to reflect lower hospital start-up losses as some of its major hospital projects have been postponed. This raises our SOP-based target price to RM4.20. KPJ remains a hold. We prefer IHH for exposure to the hospital sector.
Key result highlights
KPJ’s core net profit rose 19%yoy to RM33m in 4Q14, due mainly to higher earnings contribution from its hospitals in Malaysia. Net profit of its Malaysian operation rose 79% yoy to RM50m on the back of stronger demand and lower losses at the new hospitals. Its aged care facility in Australia also showed improved results, albeit still in the red, as losses narrowed by 48% yoy to RM1.7m. KPJ’s Indonesian hospitals almost reached break-even, thanks to higher revenue which was 16% higher than last year.
Outlook for 2015
We expect the implementation of GST by April 1 this year will erode the purchasing power of Malaysians and increase the cost of private healthcare. These may dissuade some patients from seeking treatment from private hospitals. Our recent check with the company partially confirmed our view as it has already raised charges in anticipation of higher operating cost post GST. We believe 2015 will be a tougher year for KPJ to attract patients, especially those who currently seek treatment from heavily-subsidised public hospitals. Nonetheless, we still expect its earnings to grow 11% due to lower start-up losses. Three out of its five loss-making hospitals in Malaysia should generate positive EBITDA this year.
Reviewing hospital projects
We gathered that KPJ is currently reviewing the timeline for its new hospital projects. Among the hospitals that are likely to be postponed are the ones in Bandar Dato Onn, Iskandar Malaysia, and Klang. These two projects were initially scheduled to be completed by 2016. In view of the deferment, we lower our start-up loss estimates and raise our 2016 EPS by 23%.
Source: CIMB Daybreak - 02 March 2015
