KPJ Healthcare’s (KPJ) 2QFY24 core net profit increased by 71.2% YoY to RM77.6m from RM45.3m in 2QFY23, mainly driven by higher BOR and influx of patients visits. The results were in line with our estimates at 50% but fell short of street’s estimates at 44% of full-year forecast respectively. KPJ’s revenue was up 18.5% YoY, mainly boosted by a higher BOR of 66% in 2QFY24. We maintain our FY24F-26F earnings forecasts and reiterate our Outperform rating with an unchanged SOTP-based TP of RM2.21 based on FY25 12x EV/EBITDA (near Malaysia hospital average). KPJ declared an interim dividend of 1.0 sen per share (bringing the total DPS to 3.0sen for FY24).

• Revenue. KPJ reported a revenue of RM930.6m in 2QFY24 (+18.5% YoY) mainly driven by the growth in Malaysia’s segment which recorded a higher revenue of RM914.2m (+18.6% YoY). The better performance in the Malaysia segment was supported by a higher BOR at 66% in 2QFY24 (2QFY23 BOR: 63%). We noticed a higher influx of inpatients and outpatients, up 14% and 4% YoY respectively. On a QoQ basis, KPJ’s revenue rose slightly by 2.5% QoQ, driven by an increased operational bed to 3,745 in 2QFY24, from 3,514 in 2QFY23.

• Net Profit. In tandem with a higher revenue, KPJ’s 2QFY24 core net profit increased by 71.2% YoY to RM77.6 in 2QFY24, from RM45.3m in 2QFY23, mainly driven by higher BOR and patients visits. KPJ’s PBT margin improved by 2.9ppts to 12.7% in 2QFY24. On a QoQ basis, KPJ’s EBITDA was up 13% QoQ to RM230.2m in 2QFY24, while PBT was up 30% QoQ to RM118.6m in 2QFY24, driven by stronger hospital activities.

• Outlook. We remain positive on KPJ’s growth trajectory, underpinned by the Group’s proactive marketing efforts in healthcare tourism, which are expected to draw more patients, particularly from Indonesia. KPJ's strategic focus on identifying and optimizing underperforming assets, alongside improvements in core operations, continues to sustain KPJ’s long term outlook. However, the healthcare industry is facing challenging talent landscape and persistent cost pressures, which may impact KPJ in the near term. Nonetheless, with favorable demographic trends, such as an ageing population and a growing middle-income segment, KPJ is wellpositioned for sustained growth, supported by rising demand for specialized healthcare services and enhanced accessibility.

Source: PublicInvest Research - 29 Aug 2024