KPJ Healthcare Bhd’s (KPJ) 9MFY23 beat expectations on stronger-than-expected business rebound as the pandemic ended, according to Kenanga Research.
“Its 9MFY23 net profit rose 71%, buoyed by the full economy reopening coupled with reduced losses from new hospitals,” it said in its Results Note today (Nov 29).
Consequently, the research house reiterates its OUTPERFORM call, raises its FY23-24F net profit forecasts by 4% each, and lifts its TP by 4% to RM1.56, from RM1.50, based on 28x FY24F EPS, in line with its regional peers, with no adjustment to TP based on 3-star ESG rating.
“We raise our FY23-24F net profit forecasts by 4% each, as we raise our assumption on bed occupancy rate (BOR) from 70% to 71%,” it said.
Kenanga said KPJ’s net profit beat expectations, coming in at 78% and 85% of our full-year forecast and the full-year consensus estimate, respectively.
“The variance against our forecast came largely from stronger-than-expected bed occupancy rates. YoY, its 9MFY23 revenue rose 19%, thanks to higher patient throughput, up by 4% and higher BOR of 67% (compared to 56% in 9MFY22) as demand for non-COVID related services rebounded.
“However, its net profit rose 71% thanks to better overhead absorption (on an improved turnover) as well as reduced losses from its new hospitals, which are EBITDA positive (including hospitals such asKPJ Bandar Dato’ Onn, KPJ Perlis and KPJ Miri).
Kenanga said looking ahead into FY23, it projects KPJ’s patient throughput to grow 14% compared to 12% in FY22 and BOR of 70% (vs. 58% in FY22) as the demand for private healthcare services resumes its growth path post the pandemic.
“We continue to like KPJ for the low “price elasticity of demand” for healthcare service, which mean players are less vulnerable to high inflation as they could pass on the higher cost, being a reopening play and its strong market position locally.”
The risks to the research house’s call include regulatory risk, the lack of political will to roll out a national health insurance scheme, and longer-than-expected gestation periods for its newer hospitals.
