• Maintain BUY, with new MYR2.72 TP from MYR2.50, 24% upside and 5% FY26F (Mar) yield. We are positive on Matrix Concepts' strategic exposure to the healthcare segment. Post visit, we believe Mawar Medical Centre (MMC) will not only provide a steady stream of recurring income, but also much stronger growth upon the completion of the ward expansion by end 2025. For the property segment, MVV City is expected to be the main growth driver upon its maiden launch in FY26. Current bookings of industrial land plots are already worth MYR400m.
• A successful turnaround. MMC is currently among the top three largest private hospitals in Negeri Sembilan by bed capacity. MCH has successfully turned around the hospital after taking over in 2020. MMC's revenue hit MYR94.9m in FY24 from MYR32.8m in FY21, while revenue per bed reached MYR1.23m (MYR664k excluding dialysis) from MYR575k. Its gross profit margin is now at around 55% from 46% three years ago. Its average bed occupancy rate is at 83% last year. Despite being a small hospital in a suburban area, MMC's PBT margin of around 15% as well as revenue per bed are very much comparable to larger peers based in the Klang Valley region.
• Expansion plans. MMC's management plans to focus more on orthopaedics, cardiology and gastroenterology going forward. Given the strong demand for healthcare services in Negeri Sembilan, the hospital is now undergoing an expansion. Upon completion, MMC will have 109 beds from the current 88 beds. In a longer term, the 1.7-acre land adjacent to MMC will enable further expansion with an 8-storey building and potential bed capacity of 200 beds.
• Potential challenges. While new bed capacity is expected to drive hospital's earnings over the longer term, the potential implementation of diagnosis-related group (DRG) system by the Government may somewhat cap the upside potential to hospital operators' earnings in the industry. Over the medium term, we expect MMC's PBT margin to hover at around 13-15%.
• MVV City a new growth driver. MVV City is expected to have its maiden launch in FY26. Out of the total 2,382 acres, about 1,000 acres are allocated for industrial development. We understand that about 120-130 acres have already been booked by some industrial players, and hence maiden earnings contribution from the project may kick in from FY26 onwards.
• Raising TP. As the earnings from MMC are set to grow and potentially make up 4-5% of MCH's bottomline, we now value the healthcare segment separately. Our SOP-based TP is now based on a 20% discount to property RNAV and DCF for healthcare earnings, with a 2% ESG premium also included.

Source: RHB Research - 7 Feb 2025