Period

3Q15/9M15

Actual vs. Expectations

9M15 core net profit of RM684.6m (+27% YoY) came in within expectations, at 78% and 72% of our and consensus’ full-year forecasts, respectively.

Dividends

No dividend was declared in this quarter. Key Result

Highlights

QoQ, 3Q15 revenue and EBITDA decrease 1% and 13%, respectively, due to the summer months in Turkey and long periods of holidays in Singapore, Malaysia, China and Turkey. Mount Elizabeth Novena Hospital’s revenue rose 33%. Inpatient admissions fell across the board led by Acibadem (-8.7%), Singapore (-3.1%) and Malaysia (-3.4%) which more than offset a flattish average revenue per inpatient admission across the board. The Group’s 3Q15 PATMI excluding exceptional items decreased by 5.1% due to lower EBITDA offset by a reversal of over-provision of prior year tax of RM15.2m in 3Q15.

YoY, 9M15 revenue grew 14% YoY to RM6.2b 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 RM1.5b. As a result of the robust EBITDA and reversal of over-provision of tax, PATMI (excluding exceptional items) grew by 27% to RM684.6m (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, Pantai Hospital Kuala Lumpur (phase 2), 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, completed), and (iii) in Turkey, Acibadem is currently undertaking expansion projects for Acibadem Sistina (target completion 4Q15) Skopje Clinical Hospital, Acibadem Bodrum (commence operations in 3Q15), Acibadem Maslak Hospital (targeted completion in 2017) and Acibadem Taksim (started operations 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 61x for FY15E and 55x for FY16E, which appear rich as compared to its average net profit growth prospects of 11% p.a. over FY15E and FY16E.

Risks

Delays in its greenfield and brownfield projects.

Source: Kenanga Research - 27 Nov 2015