KPJ’s 1Q20 revenue of RM884.2m (-6.3% QoQ, +0.4% YoY) brought core PATMI to RM38.5m (-54.4% QoQ, -1.5% YoY). The results came in within our expectations. 1Q20 saw a fall in revenue (-6.3% QoQ) due to decline in revenue per bed (-1.5%), revenue per patient (-1.2%) and volume of inpatient (-6.7%). Apart from that, additional expenses were incurred in regards to Covid-19; Covid-19 test kits, personal protection equipment, ventilator machines, thermo scanners, surgical masks and hand sanitizers. We maintain our forecasts, we included in audited report figures which altered out FY20-21 earnings forecast by -2%, we also introduced FY22 numbers. Our SOP based TP decreased slightly to RM1.07 (from RM1.09). Maintain BUY.

Within expectations. 1Q20’s revenue of RM884.2m (-6.3% QoQ, +0.4% YoY) brought core PATMI to RM38.5m (-54.4% QoQ, -1.5% YoY). The results came in within our expectations at 23% but slightly below consensus at 21%.

Dividend. Declared dividend of 0.3 sen per share going ex on 8 July 2020. (1Q19: 0.5 sen per share)

QoQ. Revenue fell to RM884.2m (-6.3% QoQ) attributed to the decline in revenue per bed (-1.5%), revenue per outpatient (-1.2%) and volume of inpatient (-6.7%). KPJ had seen good performance in Jan and Feb, however due to Covid-19 and MCO it has resulted to lower revenue in Mar. EBITDA too fell by -13% due to additional expenses incurred in regards to Covid-19 pandemic; Covid-19 test kits, personal protection equipment for the frontliners, ventilator machines, thermo scanners, surgical masks and hand sanitizers. Core PATMI followed with a decline by -54.4% to RM53.1m which was due to decrease in finance income (-41%) and increase in finance costs (+32.4%).

YoY. Revenue was flattish (+0.4% YoY) backed by improved revenue per inpatient (+0.1%), volume of outpatient (+4.7%) and inpatient (+0.8%). However this was slightly offset with the fall in revenue per outpatient (-0.9%) and revenue per bed (- 4.1%). Malaysia segment improved, thanks to the additional capacity in existing hospitals (KPJ Seremban (3Q19) and KPJ Ampang Puteri (1Q20)) and the opening of KPJ Batu Pahat (18 Sept 2019) and KPJ Miri (21 Dec 2019). Others segment saw a decrease of -5%, mainly due to (i) Rumah Sakit Medica Permata Hijau which recorded a significant reduction in revenue (-32%) and a decrease in number of patients (- 48%), and (ii) also from Jeta Gardens, which recorded a reduction in revenue (-11%) due to lower occupancy. However, this was slightly cushioned by the revenue increase in Rumah Sakit Medica Bumi Serpong Damai (+13%). EBITDA mirrored topline, (-0.1%) at RM153.0m. Core PATMI of RM38.5m showed a slight decline of - 1.5% despite lower tax expense (-29.6%) that was aided by the tax deduction received from the Covid-19 additional expenses.

Outlook. With Covid-19 impact, we expect the following quarters to be challenging for KPJ. KPJ will be focussing on its core services while managing its costs apart from adding new areas of service (i.e. tele-medicine and home visits).

Forecast. We maintain our forecasts as results were in line and as we had already factored in Covid-19 impact back in Apr. We included in audited report figures that changes our FY20-21 earnings forecasts slightly by -2%, we also introduce FY22 numbers.

Source: Hong Leong Investment Bank Research - 11 Jun 2020