-  KPJ Healthcare Bhd announced yesterday that its wholly-owned subsidiary company, Kumpulan Perubatan (Johor) Sdn Bhd, had entered into a memorandum of understanding (MoU) with Pelaburan Hartanah Bhd (PHB) and Nadayu Properties Bhd to develop KPJ Damansara Specialist Hospital II.

-  The parties intend to sign three agreements, namely the Sale and Purchase Agreement (SPA), Agreement to Lease (ATL), and the Lease Agreement (LA) within the next six months.

-  According to KPJ, Nadayu will develop at its own cost a nine-storey hospital building (300 beds) with a built-up area of 459,00 sq ft. The building will come with 636 car parking bays and other infrastructure.

-  Nadayu will then hand over the property to PHB within three years from the signing of the agreements.

-  Note that the land will be built on a gross area measuring 2.95 acres, a portion of the 6.2 acres of land (located in Mukim of Batu, Tempat Segambut, Kuala Lumpur) that is part of the SPA. Dinamik Serimas Sdn Bhd is the current proprietor of the land.

-  After the handover, PHB will then lease the premise to KPJ for a period of 15 years, with an option to renew for another 15 years.

-  We understand that the new hospital is located nearby the Taman Tun Dr Ismail township and within ~8km from the current KPJ Damansara Specialist.

-  It would take about 3-4 years for the hospital to be operational.

-  We understand that KPJ will likely retain its operations in the profitable KPJ Damansara Specialist, with a few of the services moved to the new premise when it is ready. There is also a likelihood that the current premise would offer services similar to that being offered at Tawakkal Health Centre.

-  Overall, we are neutral on the development as it would take another 3-4 years for the hospital to be operational and profitable. We maintain HOLD.

Source: AmeSecurities