Review

• KPJ Healthcare Berhad’s (KPJ) 1H23 net profit of RM98.8mn came in at 43.9% and 42.7% of our and consensus’ full-year estimates. We deem the result as within expectations as we expect 2H23 results to be stronger.

• A third interim dividend of 0.8sen per share was declared for FY23, bringing YTD total dividend to 2.05sen per share (vs. 1.0sen last year).

• YoY, 1H23 PBT surged 72.8% to RM146.2mn mainly driven by Malaysia segment. Malaysia ops reported a revenue growth of 21.2% to RM1.6bn, driven by higher inpatient numbers which grew 25%. Bed occupancy rates rose to 66% from 52% in 1H22.

• However, Australian operations remained a drag on earnings with a LBT of RM18.2mn (vs. RM10.0mn in 1H21). This was due to the lower occupancy rate.

• QoQ, revenue and net profit declined by 3.6% and 9.5% to RM799.5mn and RM46.9mn respectively. The weaker performance was due to lower number of inpatients (-6.3%) and outpatients (-5.8%). As such, PBT margin decreased 0.8 pp to 8.6%.

Impact

• No change to our earnings estimates pending guidance at an analyst briefing today.

Outlook

• We are confident that 3Q23 bed occupancy rates will be higher than 2Q23. In addition, the ongoing efforts to recruit more consultants and add new beds would bode well for the group.

Valuation

• Reiterate our Buy recommendation on KPJ with an unchanged target price of RM1.32/share based on SOP valuation.

Source: TA Research - 30 Aug 2023