KPJ Healthcare Berhad

KPJ Healthcare in ‘robust health’ with solid expansion

KUCHING: KPJ Healthcare Bhd (KPJ Healthcare) has been regarded as being in ‘robust health’ as its ongoing expansion will reinforce its position as the country’s leading healthcare provider.

KUCHING: KPJ Healthcare Bhd (KPJ Healthcare) has been regarded as being in ‘robust health’ as its ongoing expansion will reinforce its position as the country’s leading healthcare provider.

OSK Research Sdn Bhd (OSK Research) in a research report yesterday opined, “Four of KPJ Healthcare’s new hospitals are under construction currently, while work on another three is expected to start in 2012.

“Other than greenfield projects, KPJ Healthcare is still on the lookout for potential acquisitions as part of its expansion strategy.

“Its goal of achieving revenue of RM2 billion for 2012 is highly achievable in view of the increase in patient capacity and higher facilities utilisation.”

Construction on the Bandar Baru Klang Specialist hospital was recently completed and it was expected to start operating by the first quarter of financial year 2012 (FY12), pending further approvals from the authorities.

In addition, the potential listing of regional healthcare giant Parkway Pantai Ltd would be the positive valuation rerating catalyst for the sector whereby KPJ Healthcare would be a prime beneficiary.

“We believe that the innovative use of real estate investment trust (REIT) as a vehicle to recycle its capital will help sustain KPJ Healthcare’s growth ambitions without straining its balance sheet.

“Although its venture into the home retirement business in Australia is not expected to contribute significantly to earnings in the near future, we believe that in the long run, it will prove to be a significant growth catalyst as there is untapped market potential locally.”

Despite the fact that the group focused on the community-based business, it was also broadening its exposure to medical tourism progressively.

As capacity constraints had impeded the expansion of its medical tourism business, the research house believed that the group’s growth via new and existing hospitals would allow it to enlarge its market share in the segment.

Armed with its extensive experience in nursing education, KPJ Healthcare would sharpen its focus on the education segment as a second core business.

Its nursing college was recently conferred university college status as well as granted government approval to conduct its own medical courses.

“Other than to complement its private healthcare services business, we believe the education business should provide meaningful earnings in the long run.

“We hold firm to our view that the stock is excellent for long-term investment and portfolio balancing as it offers a defensive growth story and pays consistent dividend,” it noted.

The research house pegged KPJ Healthcare’s fair value at RM5.21 per share based on 19.6 times FY12 price earnings ratio which in turn was the average of its regional peers.