MORNING CALL:4/12/23

CGS-CIMB thinks that KPJ is in the pink of health

Transcript

00:00 As earnings season ends, CGSCIMB walked away from a post-analyst briefing with KPJ Healthcare

00:07 feeling more optimistic about its profitability.

00:10 It already has an ad call on it but has raised its target price by 20 cent from RM1.50 to

00:15 RM1.70, implying a possible 27% upside.

00:20 It was the combination of increased operational bids and higher bid occupancy rate or BOR

00:25 that drove KPJ's 15.9% year-on-year revenue growth in the third quarter.

00:31 Management said KPJ has put in place plans to increase its bid capacity to 4.1k operational

00:36 bids in FY24 and believes that operational improvements, especially for its gestating

00:42 hospitals, should support better BORs.

00:45 According to management, Health Tourism contributed about 10% of its revenue in the third quarter,

00:50 which is much higher than what was recorded for the entirety of FY2022.

00:55 With the completion of the disposal of its Indonesian ops in the third quarter, management

00:59 mentioned that KPJ is also exploring opportunities to further divest other loss-making foreign

01:05 businesses, including KPJ Taka as well as Jeta Gardens.

01:09 KPJ actually guided for a capex of $450 million in FY24 to support its capacity expansion

01:15 plans and targets to reach an EBITDA margin of 28% in five years' time, with better operating

01:21 leverage across its assets.

01:23 CJSC IMB actually lifts its FY23, 24, 25 EPS by 19.2, 13.8 and 8.2% respectively to reflect

01:33 higher-than-expected bid capacities.

01:35 Following the slew of updates, Bloomberg data shows Tenbuys two holes on KPJ Healthcare

01:39 with the average target price working out to RM1.57, which is 23 cent more than its

01:44 last close.

01:45 [Music]