• 1Q18 core profit slumped 21.7% yoy and 43% qoq, to RM40m. The setback arose from poor performance of its Indonesia unit which was also exacerbated by the strong ringgit.

• 1Q18 core profit came in below our expectations at 18% but was broadly in line with consensus at 23%. Our forecasts is currently under review pending an update meeting with management.

• Similarly, our HOLD call and RM1 SOP-derived TP on the stock is also under review pending the outcome of the meeting.

Revenue boosted by yoy growth in Malaysia

KPJ 1Q18 revenue grew 5.6% yoy but fell 2.6% qoq to RM823m. The positive performance was largely driven by the Malaysia operations. It was attributed to increase number of patients and complex cases per inpatient. Pre-tax profit margin expanded to 7.5% (1Q17: 7.0%) mainly contributed by the revenue growth and better associate contribution.

Poor net profit recorded

However, core profits fell 43% qoq and 22% yoy to RM40m. The weakness was largely due to higher effective tax rate amidst under provision of prior taxes. At pre-tax level, earnings were up 12.3% yoy yet declined 17.9% qoq to RM61m.

Weak Indonesia operation

The segment faced challenges where occupancy rate for Rumah Sakit Bumi Serpong fell to 37% (1Q17: 49%) whilst gains from the higher occupancy rate at Permata Hijau (1Q18: 54%; 1Q17: 40%) was diluted by the strong ringgit.

Dividend declared

A single tier interim dividend of 0.5sen was declared and paid during the quarter. We expect a total dividend of 10.9 sen for FY18, translating to dividend yield of 2.9% at current level.

Hold TP of RM1.00

We currently put our earnings forecasts under review pending an upcoming update meeting with management. Similarly, our HOLD call and SOP-derived TP of RM1.00 is under review pending the outcome of the meeting.

Source: BIMB Securities Research - 31 May 2018