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20 February 2023. Monday
KUALA LUMPUR (Feb 20): KPJ Healthcare Bhd’s impressive set of results in the fourth quarter ended Dec 31, 2022 (4QFY2022) prompted several analysts to raise their target prices (TPs) for the stock.
KPJ’s net profit jumped more than three times to RM72.09 million in 4QFY2022 from RM20.33 million a year ago — the highest since its reported net profit of RM84 million for 4QFY2019.
Its revenue grew 14.7% to RM780.94 million from RM680.78 million a year before, and the group announced a single tier interim dividend of 0.6 sen per share, to be paid on April 14 with an ex-date on March 20.
Following the results, CGS-CIMB has maintained a “buy” call on KPJ with a higher TP by 12% to RM1.32, from RM1.18, based on an updated calendar year 2024 (CY2024) forecast P/E (price-earnings ratio) 31 times based on a 10-year mean versus 32 times previously.
It has also raised its financial year 2023/2024 forecast (FY2023/2024F) core earnings per share (EPS) by 18% and 16% respectively to factor in lower opex (operating expenditure) and other housekeeping adjustments.
“While share price rose 34% from its one-year low at end-September 2022, it’s FY2023F (financial year 2023 forecast) P/E of 26.2 times is still 17% (0.5 s.d.) below its 10-year historical mean,” said analyst Sherman Lam Hsien Jin.
“Overall, FY2022 core earnings per share (EPS) was a beat, exceeding our forecast by 19% (14% above Bloomberg consensus), mainly owing to lower than expected opex,” he added.
Maybank Investment Bank has maintained a “buy” call with a higher SOTP (sum-of-the-parts)-derived TP of RM1.20 (from RM1.12) on KPJ, after the group’s FY2022 results exceeded its expectations at 111% and consensus full year estimate at 117%.
“We raise our FY23-24E (financial year 2024 estimates) earnings by 10%-11%, as we impute a higher margin assumption and occupancy rate for the group,” said analyst Shafiq Kadir.
“KPJ should continue to benefit from rising demand for private healthcare and health tourism,” he said.
The disposal of its Indonesian ops is also materialising, as the group has entered into a share sale agreement to dispose of its entire interest in the two Indonesian hospitals at an equity value of RM25.7 million. This, combined with the disposal of Jeta Gardens, will be earnings accretive to the group, Shafiq added.
Meanwhile, Public Investment Bank has also raised it SOTP-based TP to RM1.25 (from RM1.05), and maintaining an “outperform” call, after the group’s full year core Patami (profit after tax and minority interest) of RM154.6 million had beaten its forecast at 111% and 109% of its consensus’ full year forecast.
“As such, we raise our FY23-26F (FY2026 forecast) earnings by 23% to 54% to factor in higher patient volume,” it said.
“Based on FY(20)22 results performance, KPJ has managed to recover and revert to its pre-pandemic level, mainly due to stronger inpatient volume and higher revenue intensity.”
“We believe KPJ will continue to benefit from the nation’s economic recovery and the reopening of international borders, translating to higher inpatient volume.”
Additionally, the favourable demographic trends such as ageing population and growing middle income population should support long-term growth, it added.
At the time of writing, KPJ’s share price rose by three sen or 2.83% to RM1.09 on Monday (Feb 20), giving it a market capitalisation of RM4.91 billion.
