Earnings growth for KPJ looking dull in first quarter
KUCHING: KPJ Healthcare Bhd’s ( KPJ) earnings growth for the remainder of the year is looking to be dull according to analysts following the release of its first quarter financial year 2017 (1QFY17) results.
In a company results report by the team over at MIDF Amanah Investment Bank Bhd ( MIDF Research), it was reported that KPJ’s 1QFY17 earnings came in at around RM38.3 million which was a 12 per cent increase year over year (y-o-y).
The earnings were within consensus expectations, accounting for 25.7 per cent of consensus full- year earnings forecast.
According to MIDF Research, the revenue boost was mainly due to the combination of organic growth from existing hospitals as well as the increasing revenue from newly opened hospitals across all markets.
“The revenue from Malaysian hospitals increased by 6.1 per cent y-o-y attributable to increase in revenue generated by its newly opened hospital KPJ Pahang,” said the research arm, who added that the increase in revenue was also contributed by KPJ’s existing hospitals which improved last financial year.
Going forward, however, earnings growth for the group is looking to lacklustre due to a challenging operating environment that has caused inpatient volume to decrease by 1.2 per cent y-o-y and outpatient to decrease by 2.1 per cent yo-y.
“Occupancy rates were also observed to have dropped by 4.5 ppts y-o-y to 68.3 per cent this quarter,” added AllianceDBS Research Sdn Bhd (AllianceDBS Research).
Occupancy rates in KPJ’s Indonesian operations were observed to be one of the lowest with an average bed utilisation of 40 per cent and are expected to remain challenging for the next few quarters.
Similarly, its operations revenue recorded a marginal decrease by 3.5 per cent y-o-y.
Due to this challenging operating environment, the AllianceDBS Research has guided that it would likely for KPJ to slowdown some of it hospital expansion plans.
“While management is planning to open four new hospitals by 2018, there is no specific time for new hospitals beyond 2018 as management have indicated that it will be dependent on market conditions.” With that being said, both analysts will be remaining neutral on the stock at this juncture as they do not foresee any significant catalysts for a rerating in the near to medium-term.
They do however anticipate higher contribution from the group’s newly opened hospitals as they leave their gestation periods.
MIDF Research maintains its ‘Neutral’ call on the stock with a revised target price of RM4.30 from RM4.20, while AllianceDBS Research maintained its ‘hold’ rating with a target price of RM4.50.
Meanwhile, KPJ also announced an interim dividend of 1.8 sen for the quarter under review.