KPJ’s earnings growth to come from new hospitals, matured hospitals

KUCHING: KPJ Healthcare Bhd’s ( KPJ) earnings growth has been projected to come from both the group’s new hospital and matured hospitals.

According to the research arm of Kenanga Investment Bank Bhd ( Kenanga Research) KPJ’s earnings growth is expected to come from narrower losses and profitability for hospitals built two to three years ago including KPJ Rawang, Maharani, Pasir Gudang and Pahang.

The research arm of MIDF Amanah Investment Bank Bhd ( MIDF Research) also expected further improvements in terms of revenue contributions coming from KPJ’s new hospitals as well as its more matured hospitals.

“Add i t iona l ly, we ar e expecting KPJ Perlis which was opened on May 17, 2018 and KPJ Bandar Dato’ Onn which is expected to be opened in the third quarter of financial year 2018 (3QFY18) to further drive the revenue growth for the year,” MIDF Research said.

Kenanga Research noted that going forward, KPJ Perlis (greenfield, 90 beds) is expected to commence operations by end of second quarter of 2018 (2Q18).

Besides KPJ Bandar Dato’ Onn, the research arm noted that brownfield expansions including Taiping and Sri Manjung are also expected to start operating by 3Q18.

“KPJ Miri and KPJ Kuching are expected to commence operations by 2Q19 each,” it said.

Overal l, MIDF Research deemed that KPJ is attractive in terms of valuation as it remains undervalued when compared against its regional peers.

The research arm pointed out that despite having 25 hospitals in the group’s network, KPJ cont inues to trade below regional average at FY18F price earnings ratio ( PER) at 22-fold versus an average of 30-fold to 40- fold for its regional peers with lesser number of hospital under their belt.

In Kenanga Research’s outlook, it said that the stock is currently trading at 20 per cent and 44 per cent discount compared to its historical average of 25-fold and regional peers of 35-fold, respectively.

“The 44 per cent discount to regional peers is wider compared to the historical average of 30 per cent,” the research arm said.