KPJ Healthcare’s 4QFY23 net profit increased by 14% YoY to RM83.5m, mainly due to higher influx of patient volume and bed occupancy rate (BOR). After stripping off non-operating items, KPJ FY23 core net profit increased by 47% YoY to RM107.9m. The results were within our expectation but exceeded street’s estimates at 120% of full-year forecast. KPJ has completed the disposal on its loss-making Indonesian operation and aged care operation in Australia. For 1HFY24, we expect KPJ’s BOR to remain at c.70% backed by higher inpatient volume. We maintain our FY24-25F earnings forecasts and our Outperform rating with unchanged SOTP-based TP of RM1.81, based on 12x EV/EBITDA (near Malaysia hospital average). KPJ declared an interim dividend of 1.0 sen per share.

• Higher BOR and inpatient volume. KPJ reported a revenue ofRM911.5m in 4QFY23 (+19% YoY) mainly driven by the growth inMalaysia’s segment which recorded a higher revenue of RM892.3m(+18.5% YoY). The better performance in Malaysia segment wassupported by a 4% YoY increase in total number of patient visits, coupledwith 6% YoY increase in surgery cases and improvement of inpatientdays by 29,830 days in 4QFY23. Notably, KPJ Damansara 2, KPJPenang and KPJ Puteri exhibited the largest increase in revenue uponnew openings. Meanwhile, the overall Group BOR has increased to 69%in 4QFY23 (4QFY22: 64%).

• A slight drop in PBT and net profit. KPJ’s 4QFY23 PBT slid 9% YoY toRM83.4m, mainly due to a one-off impairment loss on PPE and retirementof investment property in Australia amounting to RM7.6m, as well asimpairment loss of RM16.8m from Jeta Gargen’s aged care business.PBT margin contracted by 2.8ppts to 9.2% in 4QFY23. After stripping offthe non-core items, KPJ’s core net profit stood at RM107.9m in 4QFY23(+47% YoY).

• Outlook. We are optimistic about KPJ's outlook, expecting continuedadvantages from the reopening of international borders, which shoulddrive an increase in demand for healthcare services and inpatientadmissions. We continue to like KPJ’s efforts in identifying and optimizingunderperforming assets, coupled with improvements in routine businessoperations and processes. The Group's ongoing capacity expansionsand strategic emphasis on medical health tourism positions well forpremium pricing, enhancing revenue intensity and economies of scale tocounter inflationary pressures. With favorable demographic trends,including an aging population and a growing middle-income segment,KPJ is poised for sustained growth, driven by heightened demand forspecialized healthcare services and improved accessibility.

Source: PublicInvest Research - 19 Feb 2024