KPJ Healthcare Berhad

Positive views on KPJ s foray into Bangladesh

The market seems to like KPJ Healthcare Bhd 's move to partner a trust to run a hospital in Dhaka banagladesh, with analysts viewing the move as strategic.

PETALING JAYA: The market seems to like KPJ Healthcare Bhd's move to partner a trust to run a hospital in Dhaka, Bangladesh, with analysts viewing the move as strategic.

To recap, KPJ has entered into a joint venture with the Father of the Nation Bangabandhu Sheikh Mujibur Rahman Memorial Trust to lease the Sheikh Fazilatunessa Mujib Memorial KPJ Specialist Hospital from it and manage it.

Affin Investment Bank Bhd analyst Sharifah Farah said the entry into Bangladesh marked another milestone for the private healthcare services provider, which already had a presence in Indonesia, Australia and Thailand.

She said despite the key economic and political risks involved, the exposure would be
mitigated by KPJ being the sole operator of the hospital and the fact that there was no huge investment into the country such as land and buildings involved.

"It not only provides another revenue stream for the group in the long run, but the move
could also attract more medical travellers into the country.

"Our rerating catalysts include continuous growth in private healthcare demand in tandem with the growing middleincome population, growth in medical tourism and the
group's continuous expansion programmes," Sharifah Farah noted.

Similarly, RHB Research analyst Chong Ooi Ming said the new venture would be a platform to provide KPJ's services to medical tourists from Bangladesh, seeing that a whopping 11,600 Bangladeshis had visited Malaysia for medical treatment last year as reported by the Tourism and Culture Ministry.

However, Chong expressed concerns on the company incurring RM5mil to RMlOmil in
startup losses including depreciation costs in the first year of operations.

"KPJ hospitals typically have a five year breakeven period.

"We remain conservative on KPJ, as we are cautious of potential earnings disappointment in the upcoming quarters due to high startup costs since the group plans to double its capacity to 5,000 hospital beds in Malaysia by 2020," he said.

KPJ has said it would bring in specialists and nurses to serve in the hospital, as well as acting as tutors to new specialists, to work alongside local professionals.

"The hospital would be a model for publicprivate partnership initiatives in Bangladesh.
As it is, 30% of patients from the hospital are from the poor category and are treated at a special rate. KPJ's move is further supported by the shortage of doctors, paramedics and nurses and the poor healthcare system in the country,"AmResearch on its part said.

KPJ closed 10 sen higher to RM6.28.