Period

2Q15/1H15

Actual vs. Expectations

1H15 core net profit of RM461.9m (+27% YoY) came in within expectations, at 53% and 50% of our and consensus’ full-year forecasts, respectively.

Dividends

No dividend was declared in this quarter. Key Result

Highlights

QoQ, 2Q15 revenue and EBITDA rose 5% and 8%, respectively, underpinned primarily by Mount Elizabeth Novena and higher inpatient revenue which more than offset the seasonally slower revenue in Acibadem. Mount Elizabeth Novena Hospital’s revenue rose 35% to RM214m. In Singapore, inpatient admissions and average revenue per inpatient admission rose 6% and 4%, respectively. In Malaysia, inpatient admission was flat but average revenue per inpatient admission rose 14%. However, Acibadem was lower due to due to the seasonally slower Ramadhan period. Correspondingly, core PATMI rose 3% to RM234.6m.

YoY, 1H15 revenue grew 13% YoY to RM4.1b due to high intensities in patient volume and revenue of existing operations and organic growth of existing operations, the ramping up of Acibadem Atakent Hospital and Pantai Hospital Manjung and the opening of Gleneagles Kota Kinabalu. This lifted EBITDA by 13% to RM1.1b. As a result, PATMI (excluding exceptional items) grew by 27% to RM461.9m (for more details, pls refer page 2).

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 Acibadem Sistina (target completion 3Q15) Skopje Clinical Hospital, Acibadem Bodrum (target completion in 3Q15), Acibadem Maslak Hospital (target completion in 2017) and Acibadem Taksim (target completion in 2H15).

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 48x 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 - 27 Aug 2015