KPJ Healthcare Berhad

KPJ Healthcare wins lawsuit

Group turns focus on opening up more hospitals.

KPJ HEALTHCARE, the largest private hospital group in Malay­sia, is to focus on its expansion plan now that it has prevailed in its appeal against its MR70.5 mil­ lion lawsuit.

Last week, the Court of Appeal allowed KPJ Healthcare's appeal against the prior adverse decision of the Johor Baru High Court ­made on July 26 ­ and set aside the decision of the earlier case.The suit was originally filed by KPJ's co­shareholders in Hospital Penawar SB joint venture (JV). KPJ owns a 30% in the latter and manages the hospital located in Pa­sir Gudang, Johor, which opened in 1995. The suit was filed by the 70% shareholders, following the opening of KPJ's Pasir Gudang Specialist Hospital, on grounds of an alleged breach in the JV agreement. Hospital Penawar SB contributes about RM1 million to KPJ annually.

RHB Research Institute analyst Chong Ooi Ming views the court decision as a positive development for the ealthcare provider. "Now KPJ can focus to its Malay­ sian hospital openings in 2014­15 and efforts to turnaround its Indo­ nesian operations," he added.

RHB Research has maintained its neutral call on KPJ Healthcare with a fair value of RM6.13 as the research house expects  the compa­ny's earnings to get back on track after winning its recent lawsuit. However, RHB said it continuesto be cautious on KPJ's earnings outlook. "Its Malaysian expansion plans could be a drag on earnings for 2014­15, while the turnaround for its Indonesian operation is slow," he said. "We make no change to our fore­ cast, as this result was within our expectations, but we feel it lifts a major negative — sentiment­wise — overhang. That said, we under­ stand that the plaintiffs intend to appeal the court's decision," he added. For 2014- ­2015, KPJ plans to open five hospitals with a total ca­pacity of 780 beds. "While we are positive on the planned expansion, we note that ­ of these five ­ four were actually scheduled to open a year earlier. "The delays hurt KPJ's FY13 bot­ tomline with net debt rising to RM729.9 million in September this year, pushing up net inter­ est cost and further  exacerbating the higher pre­opening costs in­ curred," he said.

Last month, KPJ Healthcare col­laborated with the Nation Bang­abandhu Sheikh Mujibur Rahman Memorial Trust to open the Sheikh Fazilatunnesa Mujib Memo­rial KPJ Specialised Hospital and Nursing College in Bangladesh. The 250­bed hospital boasts a qualified and experienced team of hospital managers in place.The hospital also offers first­class healthcare services, providing Bangladeshis, including from among the poor, with greater ac­cess to international standards of treatment