• According to The Edge Markets website, the Ministry of Health (MoH), in collaboration with private hospitals and healthcare providers, has launched a service for the collection of samples for Covid-19 testing from individuals’ homes.

• This service is meant for individuals who wish to test for the disease but do not meet the criteria of Patient Under Investigation (PUI).

• The service is provided by IHH Healthcare, KPJ Healthcare, Qualitas Medical Group Sdn Bhd, Twin Tower Medical Centre KLCC, Bookdoc and DoctorOnCall.

• We believe this is neutral as the impact to earnings will be minimal for KPJ Healthcare. We believe the test kits, via its subsidiary Lablink (M) Sdn Bhd, will cost the patients around RM600 per test.

• KPJ is pricing it at a low margin to ensure its accessibility to the public.

• Going forward, we anticipate a flattish FY20F for KPJ due to higher tax as well as expected lower inpatient volume in 1HFY20F. We expect delays in non-essential treatments as well as less medical travellers during the Covid-19 outbreak.

• We maintain our BUY call on KPJ Healthcare (KPJ) with an unchanged FV of RM1.18/share. Our FV is based on PE 23x FY21F EPS. However, if Covid-19 persists into 2HFY20F, we may revise our earnings forecasts downwards.

• We continue to like KPJ Healthcare for: (1) its bright long-term prospects in the private healthcare sector; (2) vast network of hospitals in Malaysia; and (3) positive earnings growth led by capacity expansions.

Source: AmInvest Research - 12 Mar 2020