In an announcement to Bursa Malaysia, KPJ Healthcare (KPJ) via its wholly-owned subsidiary, Seremban Specialist Hospital Sdn Bhd, a whollyowned subsidiary of KPJ (SSHSB), had entered into a SPA with the AmanahRaya Trustees Berhad, being the trustee of Al-`Aqar Healthcare REIT to dispose a parcel of freehold land in Seremban, Negeri Sembilan to Al-`Aqar for a total cash consideration of RM4.3m. Upon completion of the proposed disposal, KPJ will lease the building back.
SSHSB had on Mar 2012 obtained the approval from Majlis Perbandaran Seremban in relation to the building plans for the proposed expansion of the KPJ Seremban Specialist Hospital, which includes construction of an additional eight (8)-storey physician consultant block and a six (6)-storey annexe block on the Existing Al-`Aqar Land (collectively referred to as “New Buildings”) together with Facilities. The construction of the New Buildings, which is undertaken by SSHSB, is expected to be completed in November 2015.
The proposed disposal will net an estimated gain of RM0.6m for KPJ.
This latest corporate development by KPJ will unlock the value of the properties, realise an estimated gain on disposal and raise fund for its working capital.
We maintain our earnings forecast since the savings from depreciation and borrowing cost will be offset by rental costs from leasing back the buildings.
Earnings growth is expected to be pedestrian over the next few quarters. In Indonesia, we expect losses in Bumi Serpong Damai to persist over the next several quarters due to difficulty in attracting doctors to its establishment leading to lower bed utilisation of 40%. However, this is expected to be negated by the profitable Medika Permata Hijau.
Looking into FY15, KPJ is targeting to open KPJ Perlis and KPJ Pahang Specialist. Additionally, KPJ is incurring higher staff costs due to: (i) the gradual opening of more beds since it needs to maintain a certain required ratio of staff per hospital, and (ii) KPJ employing more staff in its headquarters to support its on-going projects. We expect start-up losses from Sabah, Muar and Rawang to drag earnings due to the typical gestation period averaging between two to three years.
Source: Kenanga Research - 20 Mar 2015
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