• Maintain BUY (TP: RM1.88). KPJ’s FY23 top-line jumped by +19.2% YoY to RM3.4bn, supported by better hospital activities. In tandem, KPJ’s FY23 net profit surged by +57.5% YoY to RM281mn. The group’s bottom-line was above ours but within consensus expectations, accounting for 119% and 100% respectively. The deviation against our projection was mainly due to higher-than-expected inpatient visits and lower tax in the current quarter due to recognition of deferred tax assets. The group declared a fourth and special interim dividend totalling 1.3sen per ordinary share, bringing cumulative FY23 DPS to 3.35sen (vs. 2.0sen in FY22). Maintain a BUY call with a higher TP of RM1.88 (from RM1.84). Our valuation is derived based on SOP valuation with a WACC of 8.1% and a long-term growth of 2.5%.

• Key highlights. The group’s 4QFY23 revenue and net profit grew by +19.0% YoY and +13.6% YoY respectively. This is supported by an increase in inpatient visits, rising from 820,734 patients to 857,537 patients, along with a corresponding growth in the bed occupancy rate from 64% to 69%. It is worth to note that KPJ Damansara 2 and KPJ Penang have shown the most substantial revenue growth, attributed to being newly opened hospital.

• Earnings Revision. We have raised our FY24-26F forecasts by 53%/29%/27% as we raised our assumption on the volume of inpatient visits in Malaysia and revised our tax assumption downward.

• Outlook. We maintain our positive outlook on KPJ, especially regarding their focus on organic expansion. In FY24, KPJ plans to increase its bed capacity by adding 400 beds, bringing the total count to approximately 4,043 beds compared to 3,643 beds at the end of FY23. Furthermore, we foresee promising opportunities for KPJ driven by rising affluence and an aging population in Malaysia. We anticipate an uptick in earnings, with KPJ leveraging its cost advantages to effectively adjust pricing strategies and maintain profit margins. In the realm of medical tourism, we expect KPJ to sustain robust earnings growth, fuelled by the growing demand for highquality healthcare services.

Source: BIMB Securities Research - 19 Feb 2024