Review

• KPJ Healthcare Berhad’s (KPJ) 1H24 net profit of RM128.8mn came in at 41.2% of our full-year forecast and 42.7% of consensus estimate. We consider this to be within expectation as we expect higher patient volumes in 2H24.

• The company declared a third interim dividend of 1.0sen/share for FY24, bringing YTD dividend to 3.0sen/share (vs. 2.05sen last year).

• QoQ, 2Q24 net profit increased 51.4% to RM77.6mn while revenue rose 2.5% to RM930.6mn. The commendable performance was driven by: i) lower tax rate of 7.6%-pts to 28.7% and ii) higher bed occupancy rates (BOR). Note that the strong volumes, especially in May and June came from the return of inpatients as the Puasa month started in March this year.

• 1H24 PBT and revenue grew 32.8% and 14.9% YoY to RM210.1mn and RM1.8bn, respectively. This was boosted by higher BOR and higher bed capacity.

Impact

• No change to our earnings estimates, pending management guidance at analyst briefing today.

Outlook

• Moving into 2H24, we expect the earnings growth to come from medical tourism on the back of collaboration with local agencies in Indonesia and higher medical tourist arrivals with the visa-free entry decision, especially from China and India. In our projection, we expect KPJ’s healthcare tourism revenue to increase by 68% to RM324mn in FY24.

• Moreover, we believe that KPJ Dato’ Onn, Batu Pahat and Perlis are on track to deliver their maiden profits in FY24. Meanwhile, the performance of DSH2 is expected to improve further driven by higher operating beds and demand.

Valuation

• We maintain our Hold recommendation on the stock with a TP of RM2.00/share based on SOP valuation.

Source: TA Research - 29 Aug 2024