Highlights

AmInvest Research Reports

Author: AmInvest   |   Latest post: Tue, 26 Jan 2021, 11:15 AM

 

KPJ Healthcare - Seeks to grow public sector customer base

Author:   |    Publish date:


Investment Highlights

  • We maintain HOLD on KPJ Healthcare (KPJ), with an unchanged fair value (FV) of RM1.04/share. Our FV is based on an FY21F PE of 23x.
  • Here are the key takeaways from KPJ’s results briefing:

1. Although KPJ anticipates a steady recovery in 4QFY20, the group said that the quantum may not be as significant as previously anticipated, mainly due to the recurrence of the CMCO.

2. KPJ expects its four loss-making hospitals (KPJ Bandar Dato’ Onn, KPJ Batu Pahat, KPJ Perlis and KPJ Miri) to reach breakeven EBITDA in three to four years’ time, adding that the MCO effects have led to a delay of six months. The group intends to cut these losses by half by next year end.

3. The group is looking to grow a customer base of public-sector patients, following a successful government engagement to help alleviate the public sector’s Covid-19 burden.

4. KPJ is also seeking to raise its EBITDA margins to >20% levels (currently ~17%) within the next two to three years, through cost management optimization and its strong focus on quick returns and low gestational period developments.

5. In terms of expansion, KPJ has reached the closing stage of its more aggressive current expansion phase, with the focus now on upgrading and refurbishing older hospitals. Maintenance capex is now expected to take up two-thirds of its total capex budget, with the remainder allocated for expansion.

6. KPJ’s cost management initiatives include deploying technology applications to reduce manpower, incorporating cost centralization across the system and maintaining current staff levels. The group is targeting a 10–20% administrative expenses reduction as it consolidates its processes.

7. KPJ only has one new hospital in the pipeline, KPJ Damansara II Specialist Hospital, set to open in 1QFY22. Other notable developments include a relocation of KPJ Kluang and BDC Kuching Specialist Hospital as they are currently located at “shop lot” units that stifle growth.

8. KPJ is also looking at a potential restructuring of its Australian and Indonesian operations. Australian services have been seeing poor performances recently following a trend towards home care, as well as heightened pandemic costs.

9. The group may reconsider its capex strategy in the coming years, dependent on its full year’s results for FY20E.

  • We may re-rate the stock on the following: (1) stronger-than anticipated recovery; (2) a drastic change in expansion plans, following better-than-anticipated FY20E results; and (3) significant foreign operations restructuring.

Source: AmInvest Research - 2 Dec 2020

Share this
Labels: KPJ

Related Stocks

Chart Stock Name Last Change Volume 
KPJ 0.93 0.00 (0.00%) 1,451,900 

  Be the first to like this.
 


APPS
I3 Messenger
Individual or Group chat with anyone on I3investor
MQ Trader
View Trading Signals and run Live Backtest
MQ Affiliate
Earn rewards with MQ Affiliate Program
 
 

466  534  628  513 

ActiveGainersLosers
Top 10 Active Counters
 NameLastChange 
 DNEX 0.28-0.02 
 FINTEC 0.08+0.005 
 DNEX-WD 0.060.00 
 PBBANK 4.40+0.14 
 KEYASIC 0.105+0.015 
 KSTAR 0.145-0.03 
 AT 0.17-0.005 
 QES 0.38+0.015 
 PHB 0.0250.00 
 MLAB 0.075+0.01 

FEATURED POSTS

1. The Equity Market Index Benchmark in Malaysia CMS
2. Trading Scenarios of Derivatives Bursa Derivatives Education Series
3. Derivatives 101 Bursa Derivatives Education Series
4. Why Trade FKLI? Bursa Derivatives Education Series
5. MQ Trader - Introduction to MQ Trader Affiliate Program MQ Trader Announcement!

TOP ARTICLES

1. HARTA RESULTS RM1 BIL - WHAT IT MEANS FOR OTHER GLOVE PLAYERS? StockAdvisor FBMKLCI
2. Tan Sri Lim: “Being sick is being abnormal.” TOPGLOV allows only 2 paid sick leave p.a. LHL please make a police report if what you says is true! gloveharicut
3. CIMB: FREIGHT is trading at a 60.9% & 30.8% discount to its local & regional peers gloveharicut
4. Intco, Top Glove, Supermax - A Quick Comparison Trying to Make Sense Bursa Investments
5. Jaks Resources - Final Update :- Jaks Hai Duong Power Plant achieved FULL COD ! DK
6. Health Ministry says govt not keen to implement MCO for a long period save malaysia!
7. Eurocham: No mention of lockdown after Feb 4 in meeting with Miti save malaysia!
8. Bargain hunting lifts GLOVEs share prices, say analyst, fund manager as situation remains 'volatile' gloveharicut
PARTNERS & BROKERS