Period  4Q14/FY14

Actual vs. Expectations  FY14 core net profit of RM785m (+29% YoY) came in within expectations, at 96% and 97% of our and consensus’ full-year forecasts, respectively.

Dividends  A first and final single-tier dividend of 3.0 sen was declared during the quarter.

Key Result Highlights  QoQ, 4Q14 revenue and EBITDA rose 9% and 38%, respectively. Revenue growth was driven by intensities in all its hospitals across Singapore, Malaysia and Turkey. Parkway Singapore hospitals’ inpatient admissions fell 2.8% QoQ while its revenue per inpatient admission increased 3.0% as a result of more complex cases undertaken by the hospitals and price increases to compensate for cost inflation. Meanwhile, inpatient admissions at Parkway Malaysia hospitals grew 3.2% QoQ and its revenue per inpatient admission grew 0.5%. The solid EBITDA growth was due to a RM52.7m revaluation gain arising from PLife REIT’s investment properties and a RM36.4m divestment gain from PLife REIT’s sale of seven Japanese nursing homes in Dec 2014. Excluding exceptional items, the Group’s PATAMI increased 38% to RM244.2m.

 YoY FY14, revenue and EBITDA grew 9% and 17%, respectively, due to high patient volume and revenue intensity of existing operations and commencement of Acibadem Atakent Hospital and Pantai Hospital Manjung in 1Q and 2Q, respectively. EBITDA growth was driven by revenue and boosted by a RM52.7m revaluation gain arising from PLife REIT’s investment properties and a RM36.4m from its sale of 7 Japanese nursing homes in Dec 2014. This brings PATAMI excluding items to RM785m (29%).

Outlook  Growth driver in the next five years will come from the following: (i) In Singapore, the gradual ramp up of Mount Elizabeth Novena of which the first phase of Mount Elizabeth Novena Hospital comprising 150 (of total 333) beds (all single-bed rooms) and 13 operating theatres, (ii) In Malaysia, PPL is currently undertaking expansion projects in four hospitals, Gleneagles Kuala Lumpur, Pantai Hospital Kuala Lumpur, Pantai Hospital Klang and Pantai Hospital Ayer Keroh. Greenfield projects meanwhile, namely Gleneagles Kota Kinabalu and Gleneagles Medini will add an estimated 500 beds between end-2014 to end-2016, (iii) In Turkey, Acibadem is currently undertaking expansion projects for two hospitals, Acibadem Sistina Skopje Clinical Hospital, Acibadem Bodrum and Acibadem Maslak Hospital while Acibadem Altunizade is a greenfield development.

Change to Forecasts  No changes to our FY15E and FY16E.

Rating & Valuation  Maintain UNDERPERFORM. However, we roll forward our valuation from FY15 to FY16. As such our SoP target price is raised from RM4.20 to RM4.58.

 The stock is currently trading at PERs of 51x for FY15E and 46x for FY16E, which appear rich as compared to its average net profit growth of 11% p.a. over FY15E and FY16E.

Risks  Delays in its greenfield and brownfield projects. 

Source: Kenanga