KPJ Healthcare Bhd chairman Tan Sri Dr Ismail Bakar (right) and president/MD Chin Keat Chyuan at the launch of KPJ Healthcare's major rebranding exercise on Tuesday. (Photo by Suhaimi Yusuf/The Edge)

KUALA LUMPUR (Aug 6): KPJ Healthcare Bhd (KL:KPJ) said that it is not in a rush to inject more assets into Al-A’qar Healthcare REIT to raise fresh capital for its expansion plans.

While the private hospital operator is exploring potential mergers and acquisition (M&As), president and managing director Chin Keat Chyuan pointed out that KPJ still has substantial financial resources available, noting that the company issued RM555 million sustainability sukuk wakalah last year.

Furthermore, the healthcare group’s net gearing has been well managed in recent years, he told reporters after KPJ’s rebranding launch.

Companies inject assets into real estate investment trusts (REITs) to unlock value, and in turn help pare down borrowings and to build a strong balance sheet to support growth. KPJ’s net gearing improved to 0.44 times in 2023, compared to 0.62 times in 2019. Its total borrowings last year was RM1.91 billion.

“We are not saying that we are totally ignoring that opportunity [injecting assets], but that might not be our number one priority [at the moment] in terms of obtaining funds,” Chin said. Regarding M&As, Chin did not disclose any details about the potential target markets.

KPJ operates 29 hospitals in Malaysia, with 19 of these hospitals having been injected into Al-A’qar. KPJ aims to increase the total number of beds across all hospitals from 3,733 last year to 4,101 by the end of 2024.

“We hope the REIT can also explore other opportunities, not only from within us. While they are growing, we as a major shareholder are also growing,” said Chin.

KPJ holds a 3.37% direct stake and a 31.12% indirect stake in Al-A’qar REIT. Johor Corp is the common shareholder in KPJ and Al-A’qar REIT.

Johor Corp has a 31.12% indirect stake in Al-A’qar REIT, and it also holds a 35.86% direct stake and a 9.13% indirect stake in KPJ.

Shares of KPJ gained five sen or 2.78% at RM1.85 on Tuesday, giving it a market capitalisation of RM8.47 billion. Al’Aqar went up two sen at RM1.30, translating into a market capitalisation of RM1.09 billion.