RHB Research maintains ‘buy’ rating on KPJ Healthcare

KUALA LUMPUR: RHB Investment Bank Bhd (RHB Research) is optimistic about KPJ Healthcare Bhd’s outlook, underpinned by returning medical tourists, rising number of surgeries and improving operating efficiency.

The research firm said the new KPJ Damansara Specialist Hospital 2 (DSH2) would become an iconic symbol in KPJ’s rebranding this year.

“Apart from specialising in seven niche medical services, DSH2 will also play a crucial role in providing patient traffic to complement KPJ Damansara Specialist Hospital, particularly radiology services,” it said.

RHB Research said top-notch facilities were expected to enable DSH2 to become the key driver of the group’s healthcare tourism segment.

“The management guided for the timeline of foreign insurer (namely insurers A and G) empanelment to remain intact, which is expected to be completed by this year.

“With the onboarding of foreign insurers, KPJ expects this to increase foreign patient flow to DSH2, with expected foreign-to-local patient mix to achieve 50 per cent from 30 per cent currently.”

RHB Research added that KPJ’s targeted healthcare tourism revenue last year was RM130 million, or four per cent of the former’s full-year revenue estimate versus 5.5 per cent in 2019.

DSH2 began contributing to the third quarter of last year’s top line (less than RM1 million) after making its debut in September.

RHB Research said KPJ expected DSH2 to be earnings before interest, taxes, depreciation and amortisation (Ebitda)-positive this year, and profitability by 2025.

“On revenue, DSH2 is expected to contribute various valueadded services (mostly non-medical-related) as well as strive to capitalise on the 25 per cent premium charges it accords to healthcare tourists.

“The company is expected to undergo a rebranding exercise this year by transforming several existing hospitals into tertiary care centres.

“We maintain our ‘buy’ call on KPJ with an unchanged target price of RM1.20,” it added.