KPJ Healthcare Berhad

KPJ to expect growth in the year ahead

KUCHING: While Integrated Healthcare Holdings Sdn Bhd (IHH) is the larger entity with a wider regional network, KPJ Healthcare Bhd (KPJ) remains the dominant player in Malaysia with its existing netwo

KUCHING: While Integrated Healthcare Holdings Sdn Bhd (IHH) is the larger entity with a wider regional network, KPJ Healthcare Bhd (KPJ) remains the dominant player in Malaysia with its existing network of 20 hospitals.

According to RHB Research Institute Sdn Bhd (RHB Research) in a research report comparing the two healthcare giants in Malaysia, KPJ was operating at a high occupancy rate of 70 to 75 per cent which the believed would continue its aggressive growth strategy of two new hospitals per annum to accommodate the growing number of patients.

The local expansion plans were to create a local household brand and maintain its dominance in the local private healthcare industry in the long-term.

RHB Research affirmed its opinion that these expansion plans would cement KPJ as the leader in the healthcare segment in Malaysia.

Although IHH’s local expansion plans remained relatively smaller compared to KPJ’s expansion plans, it had intentions to compete for a larger market share locally.

Also, there could be short-term selling pressure on KPJ’s shares resulting from investors diversifying their holdings in KPJ to IHH with the listing of IHH that would widen investors’ spectrum in the local arena.

Under the Entry Point Project 4 (EPP 4) of the Healthcare National Key Economic Areas (NKEA), the government required an additional 1,900 beds to achieve its target of attracting two million healthcare travellers by 2020.

The largest contributors to the group’s medical tourism business were the KPJ Johor Specialist and KPJ Ampang Puteri Specialist hospitals due to the hospitals’ proximity to foreign communities and the availability of specialised medical treatments.

However, KPJ’s revenue contribution from medical tourism stood below 10 per cent as most of its hospitals were located closer to local communities and busy with servicing the domestic market.

KPJ intended to focus more on growing its medical tourism business in order to achieve target revenue contribution of 25 per cent by 2020.

The group had embarked on the construction of a 400-bed hospital in Bandar Dato’ Onn to tap into the foreign community from Singapore.

The risks to KPJ’s earnings included lower-than-expected patient numbers, economic recovery or a serious disease outbreak in Malaysia.

A slower-than-expected turnaround in loss-making hospitals would also be a drag on earnings growth.