KPJ Healthcare Berhad

Better outlook ahead for KPJ with new hospitals

With two new hospitals under way, KPJ Healthcare Bhd (KPJ) is set to see a strong year ahead

KUCHING: With two new hospitals under way, KPJ Healthcare Bhd (KPJ) is set to see a strong year ahead despite experiencing losses for the financial year 2012 (FY12) in its overseas operations.

According to the research team at MIDF Amanah Investment Bank Bhd (MIDF Research) in a research report yesterday, even though the group’s revenue grew by 10.6 per cent year on year (y-o-y) to RM1.91 billion, its earnings contracted due to the losses in its Indonesian and Australian operations.

“Meanwhile, the group’s Malaysian operation registered a 5.4 per cent y-o-y growth in profit after tax (PAT) to RM118.3 million on the back of 11.1 per cent y-o-y increase in revenue,” highlighted MIDF Research.

“However, the PAT margin at its Malaysian hospitals slipped 0.36 percentage points to 6.5 per cent.

“We believe the lower profitability was mainly due to the losses incurred at its newly opened Bandar Baru Klang Specialist Hospital, which is still going through its gestation period.” MIDF Research went on to note that its Indonesian operations were still ‘bleeding’, but its outlook remained promising.

“KPJ’s Indonesian operation registered a loss of RM10.1 million in FY12, but nonetheless a 2.3 per cent y-o-y improvement from the same period last year.

On a positive note, revenue surged 91.8 per cent to RM22.1 million, mainly due to the growth in the number of patients during the period,” it outlined.

“Including the contribution to be recognised from the expected completion of PT KPJ Medika in FY13, we believe the Indonesian operation will continue to show improvement in the upcoming years.”

Meanwhile, the acquisition of Jeta Gardens in Australia has started to bear fruit, MIDF Research added, with the business contributing RM30.8 million in revenue for FY12, although at a loss of RM5 million.

“Nonetheless, over the long term, we are positive on the group’s venture into this aged care facility services, as there is a huge potential for the business model to be replicated in other countries in this region.”

Looking ahead, RHB Research Institute Sdn Bhd (RHB Research) noted that KPJ was targeting to open two new hospitals in Pasir Gudang and Muar in 2013, further enhancing the group’s bed capacity to 155 units.

“We understand that operations of the Pasir Gudang hospital (Phase 1) is set to commence this month (March 2013), while construction of the Muar hospital (Phase 1) is targeted for completion by the final quarter of 2013 (4Q13),” it said.

“Separately, the construction of Sabah Medical Centre’s new hospital building has been completed last month (February 2013) and the hospital is expected to begin operations with 80 beds (Phase 1) by second quarter 2013.

“Upon completion, the above expansion plans would raise KPJ’s capacity to 2,871 beds (from 2,716 currently) and thus, help bring down its occupancy rate to a more healthy level of 70 per cent (from 80 per cent currently).”

Moving forward, RHB Research expected KPJ to deliver a stronger set of results in the calendar year 2013 with the additional beds arising from these new hospital additions.