Review

• KPJ Healthcare Berhad’s (KPJ) 1Q24 net profit of RM75.8mn was in line with expectations at 24.3% of our full-year forecast and 25.4% of consensus estimate.

• The company declared a second interim dividend of 1.0sen/share for FY24, bringing YTD dividend to 2.0sen/share (vs. 1.25sen last year).

• 1Q24 EBITDA rose 25.2% YoY to RM238.9mn, ahead of revenue growth of 11.4% to RM908.0mn. The solid performance was driven by an increase in inpatient visits of 3.4% to 91,039 patients. Bed occupancy rate (BOR) decreased by 5%-pts to 65% due to an increase in bed capacity to 3,693 beds (vs. 3,416 in 1Q23).

• Malaysia operations posted higher EBITDA of 2.8% to RM198.4mn on the back of higher revenue of 11.5% to RM892.6mn. More importantly, KPJ Damansara 2 (DSH2) recorded a significant improvement with an EBITDA of RM0.6mn in 1Q24 as compared to LBITDA of RM10.0mn in 1Q23.

• Meanwhile, Australia operations PBT of RM37.6mn (vs. LBT of RM6.3mn) was mainly due to a provisional extinguishment of net liabilities of RM43.3mn from the disposal of the aged care business in Australia.

• QoQ, revenue posted a slight drop (-0.4%) compared to 4Q23 due to lower inpatient and outpatient visits of 4% and 6% respectively. Positively, revenue per patient was higher.

Impact

• No change to our earnings projections pending updates from analyst briefing.

Outlook

• We remain confident that KPJ’s growth would be supported by resilient domestic demand and health tourism market in Malaysia. In addition, ongoing efforts to recruit more consultants and boosting performance for hospitals under the gestation period will bode well for the group.

Valuation

• We place our target price (TP: RM1.90) and Hold recommendation under review pending analyst briefing later.

Source: TA Research - 28 May 2024