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Thursday, December 1, 2016

Brokers Report: KPJ Healthcare - No Fresh Catalyst



Maintain perform with higher target price (TP) of RM4.38




9M16 core PATAMI of RM110.8m (+2.5% YoY) came in within expectations at 72% and 79% of our and consensus full-year forecasts. Maintain MARKET PERFORM and target price of RM4.38 based on unchanged 27x FY17E EPS.


Within expectations. 9M16 core PATAMI of RM110.8m (+59% YoY) came in within expectations at 72% and 79% of our and consensus full-year forecasts after excluding a one-off provision for ESOS payments (RM13.8m). A third interim single-tier DPS of 1.5 sen was declared, bringing 9M16 DPS to 4.8 sen which is within our expectation.


Key Result Highlights

QoQ, 3Q16 top line came flat at RM767m driven by lower outpatients volume (-2%) but mitigated by higher inpatients (+3%). Revenue growth came from new hospitals, namely KPJ Kuantan, KPJ Klang, KPJ Rawang, KPJ Pasir Gudang and KPJ Maharani and organic growth from existing operating units. However, 3Q16 core PATAMI fell 15% to RM32.8m compared to RM38m in 2Q16 (excluding a one-of provision for ESOS payment in 2Q16 of RM7.7m in 2Q16). Indonesia went back into the red recording a small loss of RM1m after registering two consecutive quarterly earnings, in line with lower revenue (- 25%).

YoY, 9M16 revenue rose 6% contributed by the increase in revenue from the new hospitals, namely KPJ Kuatan, KPJ Klang, KPJ Rawang, KPJ Pasir Gudang and KPJ Maharani and organic growth from existing operating units. This brings 9M16 core PATAMI to RM110.8m (+2.5% YoY) after excluding a oneoff provision for ESOS payments (RM13.8m).


Outlook. Earnings growth is expected to be pedestrian over the next few quarters. In Indonesia, there are plans to acquire an operator with a 150-bed private hospital. Elsewhere, we expect losses in Bumi Serpong Damai to persist over the next several quarters due to difficulty in attracting doctors to its establishment leading to lower bed utilisation of 40%. KPJ Pahang has just commenced operations this month. Going forward, KPJ is targeting to open KPJ Perlis and KPJ Pahang Specialist.


Maintain MARKET PERFORM and target price of RM4.38 based on unchanged 27x FY17E EPS.




Source: Kenanga Research - 01 December 2016

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