MIDF Research neutral on KPJ’s bid for more land
KUCHING: Analysts at MIDF Amanah Investment Bank Bhd ( MDIF Research) remained neutral following KPJ Healthcare Bhd’s ( KPJ) recent proposal to acquire a piece of land in Johor Bahru.
In a filing to Bursa Malaysia, KPJ announced on Tuesday that it has entered into a Sale and Purchase Agreement (SPA) with government-linked company Johor Corporation (JCorp) for the proposed acquisition of a 6,700 square metre piece of land adjacent to its KPJ Puteri Specialist Hospital ( KPJ Puteri).
The purchase price of the land is RM12.06 million, representing a discount of about 0.3 per cent based off an independent profession valuation commissioned by KPJ.
While the hospital chain has not announced the purpose for the land, MIDF Research believed the land will be used for future expansions of its KPJ Puteri hospital.
“Should the land be used for expansion of KPJ Puteri, we believe that this will enable KPJ to serve a wider customer base in surrounding areas with demands for quality private healthcare services,” said the research arm.
Despite the suggested expansion and increased business, the research is still ‘Neutral’ on the acquisition as they guided that any development on the land will take at least two to three years to be developed post successful acquisition of the land.
“Therefore, we are making no changes to our earnings estimates at this juncture.” Besides that, the research arm also guides that the acquisition of the land will no impact on the group’s gearing ratio.
“We understand from the management ( KPJ) that it intends to satisfy the purchase consideration via both internally generated funds as well as borrowings.
“After deducting the 10 per cent deposit of RM12.06 million, the balance of the total purchase price is RM10.854 million.
“Assuming that 50 per cent of the amount of RM5.427 is borrowed, the impact on KPJ’s gearing is negligible as its net gearing post- acquisition remains unchanged at 0.71 fold,” said the research arm.