Review

• KPJ Healthcare Berhad’s (KPJ) 9M23 net profit of RM189.2mn came in at 83.9% and 85.0% of ours and consensus’ full-year estimates. We deem the results as within expectations as we expect a drop in patient volumes in 4Q23.

• The group declared a fourth interim dividend of 1.05sen and a special dividend of 0.25sen per share for FY23, bringing YTD total dividend to 3.35sen per share (vs. 2.0sen last year).

• 3Q23 net profit surged 92.4% QoQ to RM90.3mn mainly due to the disposal gain of Bumi Serpong and KPJ Medica amounting to RM41.5mn. Meanwhile, revenue rose 15.7% QoQ to RM925.4mn on the back of higher outpatient and inpatient visits of 11% and 17% respectively.

• 9M23 PBT increased 61.4% to RM279.3mn mainly driven by Malaysia segment. Malaysia operations reported higher revenue of 18.7% to RM2.5bn driven by: i) higher bed occupancy rates of 67% (vs. 56% in 9M22), ii) improvement in patients visits of 3.5% and iii) 12% increase in surgeries.

• However, Australian operations remained a drag on earnings with a LBT of RM22.1mn (vs. RM16.4mn in 9M22) due to the lower occupancy rate.

Impact

• We maintain our forecasts, pending granularity from management at today’s analyst briefing.

Outlook

• We remain confident on KPJ’s growth trajectory. We continue to like the group’s strategy to further grow its medical tourism. Note that medical tourist charges/fees are more expensive (at least 20% mark-up) than local patients.

• Moreover, the ongoing efforts to recruit more consultants and add new beds would bode well for the group.

Valuation

• We place our target price (TP: RM1.32) and Buy recommendation under review pending the outcome of today’s analyst briefing.

Source: TA Research - 29 Nov 2023