(转帖) file:///C:/Users/Lenovo/Downloads/KPJ%20-%20180608%20-%20Health%20is%20wealth!%20-%20ADBS%20(1).pdf                    Health is wealth! Healthier and fitter. We maintain our positive stance on KPJ post our meeting with management. Despite its recent share price strength, we note that the stock is trading at 24x FY18 EPS, which is around -1SD of its historical mean. Furthermore, the decent 1QFY18 results have reaffirmed our investment thesis that the group’s operations are poised to pick up in FY18, as we expect the positive momentum to continue in the upcoming quarters. Where we differ: Our TP is at the higher end of the consensus range given that (1) our earnings estimates are higher than consensus as we expect all its hospitals opened in the past few years to turnaround by this year and (2) we are relatively aggressive in our valuation metrics, as we believe that the stock should trade closer to its implied historical mean PE valuation, particularly with the better earnings prospects. Potential catalysts. (1) Higher-than-expected patient volumes driven by improved healthcare affordability and (2) strongerthan expected profit margin due to lower input costs. Valuation: We reiterate our BUY recommendation for the group with a RM1.30 SOP-based TP (14x FY18F EV/EBITDA for hospital operations and 6% yield for its 38% stake in Al-Aqar Healthcare REIT). This represents a valuation of 30x FY18 EPS, which is in line with its historical mean valuation. Key Risks to Our View: Longer-than-expected gestation period for new hospitals. A new hospital takes around 3-5 years to become profitable. KPJ’s near-term earnings could be dragged by high start-up losses at the new hospitals, if the gestation period is longer than expected, or if its expansion plan proves to be too rapid. At A Glance Issued Capital (m shrs) 4,213 Mkt. Cap (RMm/US$m) 4,635 / 1,167 Major Shareholders (%) Johor Corp (%) 44.4 EPF (%) 12.9 Free Float (%) 42.7 3m Avg. Daily Val (US$m) 0.92 ICB Industry : Health Care / Health Care Equipment & Services                                                                              BUY Last Traded Price ( 7 Jun 2018): RM1.10 (KLCI : 1,785.81) Price Target 12-mth: RM1.30 (19% upside) (Prev RM1.30) Shariah Compliant: Yes Analyst CHEAH King Yoong +60 32604 3908 cheahky@alliancedbs.com What’s New  Valuation still attractive despite recent run-up  All hospitals opened over the past few years expected to turn profitable this year  Margin has room to improve  Maintain BUY with RM1.30 TP Price Relative Forecasts and Valuation FY Dec (RMm) 2017A 2018F 2019F 2020F Revenue 3,180 3,490 3,752 4,113 EBITDA 427 505 542 588 Pre-tax Profit 233 262 284 319 Net Profit 168 183 199 224 Net Pft (Pre Ex.) 166 183 199 224 Net Pft Gth (Pre-ex) (%) 1.7 10.8 8.4 12.4 EPS (sen) 3.95 4.31 4.67 5.25 EPS Pre Ex. (sen) 3.89 4.31 4.67 5.25 EPS Gth Pre Ex (%) 2 11 8 12 Diluted EPS (sen) 3.87 4.22 4.58 5.14 Net DPS (sen) 1.76 1.72 1.78 1.84 BV Per Share (sen) 40.6 43.1 46.1 49.6 PE (X) 27.8 25.5 23.5 20.9 PE Pre Ex. (X) 28.3 25.5 23.5 20.9 P/Cash Flow (X) 11.8 13.7 13.2 12.1 EV/EBITDA (X) 14.4 12.3 11.4 10.4 Net Div Yield (%) 1.6 1.6 1.6 1.7 P/Book Value (X) 2.7 2.5 2.4 2.2 Net Debt/Equity (X) 0.8 0.7 0.7 0.6 ROAE (%) 10.1 10.3 10.5 11.0 Earnings Rev (%): 1 2 N/A Consensus EPS (sen): 4.00 4.40 4.40 Other Broker Recs: B: 10 S: 0 H: 5 Source of all data on this page: Company, AllianceDBS, Bloomberg Finance L.P