Period

1Q15

Actual vs. Expectations

1Q15 core net profit of RM227.8m (+32% YoY) came in within expectations, at 26% and 24% of our and consensus’ full-year forecasts, respectively.

Dividends

No dividend was declared in this quarter. Key Result

Highlights

YoY, 1Q15 revenue and EBITDA rose 14% and 16%, respectively underpinned primarily by higher inpatient admissions and revenue intensities overall and the ramp up of operations of Acibadem Atakent Hospital in Turkey and Pantai Hospital Manjung in Malaysia, both opened in 2014 with the former offsetting the impact of weak Lira. Mount Elizabeth Novena Hospital turned into PATMI positive; Opening of Gleneagles Kota Kinabalu in May 2015 and Continental Hospitals will contribute from 2Q15 onwards. EBITDA margins improved despite the start-up losses of new hospitals due to operating leverage as patient revenues grew faster than expenses. Correspondingly, core PATMI rose 32% to RM227.8m.

QoQ, 1Q15 revenue increased 3% whilst EBITDA decreased 14%. Core PATMI fell 6.7% due to the high base effect arising from RM52.7m revaluation gain from PLife REIT’s investment properties that are held for rental to external parties and RM36.4m divestment gain from PLife REIT’s sale of seven Japanese nursing homes in 4Q14.

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 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 (schedule to open by 2H15), Pantai Hospital Kuala Lumpur (phase 1 to commence operation in Mar15), Pantai Hospital Klang (expected completion end 2016) and Pantai Hospital Ayer Keroh (expected completion end-2017). Greenfield projects meanwhile, namely Gleneagles Kota Kinabalu (to commence operation in May15) and Gleneagles Medini (phase 1, 150 beds target completion in 2H15), (iii) in Turkey, Acibadem is currently undertaking expansion projects for two hospitals, Acibadem Sistina (target completion 2Q15) Skopje Clinical Hospital, Acibadem Bodrum (target completion in 3Q15) and Acibadem Maslak Hospital (target completion in 2017) while Acibadem Altunizade is a greenfield development (target completion in 2016).

Change to Forecasts

No changes to our FY15E and FY16E numbers.

Rating & Valuation

Maintain UNDERPERFORM. Our target price is RM5.00 based on SOP. The stock is currently trading at PERs of 53x for FY15E and 49x 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 Research - 29 May 2015