KPJ Healthcare Berhad

JP Morgan sees KPJ issuing special dividend soon

JP Morgan has raised the target price of KPJ Healthcare Bhd to RM7.10 per share from previous RM6.60, saying growth of the company is on tract and a special dividend may be announced in less than two

KUALA LUMPUR (Nov 8): JP Morgan has raised the target price of KPJ Healthcare Bhd to RM7.10 per share from previous RM6.60, saying growth of the company is on tract and a special dividend may be announced in less than two months.

In a positive report on KPJ, which commands 22% market shares in the local healthcare sector, JP Morgan's analysts said: "With on-track capacity expansion, we expect KPJ's steady asset-light capacity expansion to drive 22% p.a. 3-year EPS CAGR with ROEs rising from 15.9% in 2011 to 21% in 2014."

"We raise our PT to RM7.10, largely on base-year rollover and lower risk-free rate.... Trades at FY12/13E P/E of 24.5x/20.2x are a steep discount to local peer IHH and comfortably below regional peers. Watch out for a potential dividend surprise," it added.

KPJ was trading at RM6, down one sen, at 3.05pm today.

JP Morgan noted that KPJ has added three brown-field hospitals this year and said it expects these hospitals to be earnings accretive within the next 12-months.

It said: "We believe KPJ will continue to adopt its asset light growth model by injecting its hospital assets into Aqar REIT, which minimises its asset base while keeping net gearing at a minimum…

"Based on recent asset injection into Aqar REIT, we believe there is scope for special cash dividends/dividend in specie given management's intention to maintain a below 50% stake in Aqar REIT (from current 53%) to avoid the consolidation of debt."

It anticipates a cash/share payout of 6 sen or yield of 1% over and above its RM0.13 estimate.