KPJ Healthcare's (KPJ) 3QFY24 core net profit increased by 16.3% YoY to RM86.0m from RM74m in 3QFY23, mainly driven by a higher BOR and an influx of patient visits. The results were in line with the street's estimates at 77.4% but slightly above our estimates at 81% of full-year forecast, respectively. KPJ's revenue was up 14% YoY to RM1,032.8m, boosted by a higher influx of patient visits. The discrepancy in our forecasts was due to a higher-than-expected BOR and an increase in both inpatient and outpatient visits. We have raised our FY24F-26F earnings forecasts by 11% to factor in a higher number of patient visits and BOR. We reiterate our Outperform rating on KPJ, with a higher SOTP-based TP of RM2.56 based on FY25 12x EV/EBITDA (near the Malaysian hospital average). KPJ declared an interim dividend of 1.15 sen per share, bringing the total DPS to 4.15sen for FY24.

• Revenue. KPJ reported a revenue of RM1,032.8m in 3QFY24 (+13.9% YoY), mainly driven by the growth in Malaysia's segment, which recorded a higher revenue of RM1,015.7m (+14.4% YoY). The better performance in the Malaysia segment was supported by 6.5% YoY growth in inpatient visits and 1.7% YoY growth in outpatient visits. The BOR remained stable YoY at 72% in 3QFY24 (3QFY23 BOR: 73%). On a QoQ basis, KPJ's revenue improved by 11%, driven by a 7.6% increase in surgeries, a 9% growth in BOR, and an average 9% increase in both inpatient and outpatient visits.
• Net Profit. In tandem with higher revenue, KPJ's 3QFY24 core net profit increased by 16.3% YoY to RM86m from RM74m in 3QFY23, mainly driven by a higher BOR and an increase in patient visits. KPJ's PBT margin declined by 1.5ppts YoY to 13.5% in 3QFY24, mainly due to higher operational expenses. On a QoQ basis, KPJ's EBITDA decreased by 2% QoQ to RM253.7m, while PBT rose by 2.4% to RM139.6m in 3QFY24, driven by stronger hospital activities.
• Outlook. We maintain a positive outlook on KPJ's growth prospects, supported by its proactive marketing efforts in healthcare tourism, particularly in attracting patients from Indonesia. The Group's strategic initiatives to identify and optimise underperforming assets, coupled with enhancements in core operations, reinforce its long-term growth trajectory. However, the challenging talent landscape and persistent cost pressures within the healthcare sector may pose near-term headwinds. Nonetheless, KPJ remains well-positioned for sustained growth, bolstered by favourable demographic trends such as an aging population and an expanding middle-income segment, driving demand for specialised healthcare services and improved accessibility.

Source: PublicInvest Research - 26 Nov 2024