OSK Research maintains Buy on KPJ, target price RM2.95

OSK Research maintains Buy on KPJ, target price RM2.95
Written by OSK Investment Research
Friday, 22 January 2010 09:12

KUALA LUMPUR: OSK Investment Research is maintaining its forecast and BUY recommendation on KPJ Healthcare at an unchanged target price of RM2.95 based on 18.5 times price-to-earnings on FY10 EPS.

It said on Friday, Jan 22 that it likes KPJ’s business model as well as its promising growth potential in a defensive sector, on top of its on-going expansion.

"We would like to reiterate our view that KPJ is an excellent choice for portfolio balancing as well as long-term investment in view of its relatively recession-proof business and steady dividend payout," it said.

It added KPJ’s management had stated it sees the growth momentum in 2009 continuing into 2010, supported by a higher number of patients and higher utilization rate per patient.

"To expand its hospital network, KPJ has identified several potential candidates with focus on areas with untapped and growing demand for private healthcare such as Johor and East Malaysia," it said.

KPJ Healthcare targets RM2b revenue in 2012

KPJ Healthcare targets RM2b revenue in 2012
Published: 2009/12/22

KPJ Healthcare Bhd (5878), the largest operator of private hospitals in Malaysia, has target its annual revenue to reach RM2 billion in 2012 through the continued expansion of operations throughout the country.

According to its chairman Tan Sri Muhammad Ali Hashim, the company will expand operations in the country either organically, by takeovers or building new hospitals.

"Through this continuous expansion of operations,we are confident of achieving an annual revenue of RM2 billion in 2012," he told reporters after the company's Extraordinary General Meeting (EGM) in Johor Baru yesterday.

He said the company had allocated RM150 million for capital expenditure this year and a similar amount would be spent next year for the same purpose.

The company's performance for the first nine months until September 30 2009 showed it had achieved revenue of RM1.07 billion and a net profit of RM80.57 million, compared to RM944.8 million and RM67 million for the same period last year.

KPJ, a subsidiary of the Johor Corporation owns 19 hospitals in Malaysia and two in Indonesia.

Muhammad Ali said the company had increased its network of hospitals with the JPJ Penang Specialist Hospital which began operations in August, while the Tawakal Hospital Kuala Lumpur which is moving to a new building, is expected to open in the first quarter of next year.

He also said that KPJ is building a new hospital in Klang, Selangor, which is expected to be open for operations in 15 months.

He said on December 16, the company had announced its move to take over the Maharani Specialist Hospital costing RM22 million in Muar, with another RM30 million being spent to develop it.

On its overseas operations, he said, the company's board of directors will re-evaluate investments in Bangladesh and Saudi Arabia following the current international financial crisis.

KPJ owns two hospitals in Indonesia, the RS Medika Permata Hijau and RS Bumi Serpong Damai. Both are located in Jakarta.

The company also operates a hospital in Padang, the Rumah Sakit Selasih, which was badly damaged by the recent earthquake which hit the region.

Earlier at its EGM, KPJ received approval from its shareholders to proceed with its proposed share split, bonus and warrant issue.

The proposed exercise involves the sub-division of one ordinary share of RM1.00 each in KPJ into two ordinary shares of RM0.50 each in KPJ, followed by a 1-for-4 bonus issue and a subsequent 1-for4-free warrant issue. - Bernama

KPJ targets RM2b turnover by 2012

KPJ targets RM2b turnover by 2012
Written by Bernama
Monday, 23 November 2009 23:23

BUKIT MERTAJAM: Malaysia's largest private hospital group KPJ HEALTHCARE BHD [] aims to achieve an annual turnover of RM2 billion by 2012.

Chairman Tan Sri Muhammad Ali Hashim said the group was confident of achieving the target through its existing specialist hospital network and the services provided by several support companies in the group as well as the opening of new hospitals, takeover of other private hospitals and acquisition of sophisticated equipment.

KPJ Healthcare runs 19 hospitals nationwide, including the one officiated by Penang Yang di-Pertua Negeri Tun Abdul Rahman Abbas in Bandar Perda here today.

It also has three hospitals overseas, namely in Indonesia, Bangladesh and Saudi Arabia.

Speaking to reporters before the opening ceremony, Ali said: "In 2007, KPJ Healthcare recorded a revenue of RM1.1 billion and now, it has reached RM1.4 billion. According to the plan, we are sure the RM2 billion target by 2012 can be achieved."

Penang's position as a medical tourism destination would also allow the hospital to provide services to foreigners who came to the state for medical purposes, he said.

"We have invested about RM80 million for phase one of the new hospital, including the latest medical equipment like magnetic resonance imaging, computer tomography scanner and catheterisation laboratory, and we plan to develop phase two in stages later," Ali said.

He said that under phase one, the hospital, which began operations in August with 100 beds, would have the number of beds increased to 236 based on need.

He said that before this, KPJ Healthcare had taken over a specialist hospital in Bukit Mertajam and following the opening of KPJ Penang, the old hospital building would be turned into a nursing college. — Bernama

http://www.theedgemalaysia.com/business-news/154289-kpj-targets-rm2b-turnover-by-2012.html

4 important conclusions about the local market regarding bonus issues

There are possibly four important conclusions about the local market regarding bonus issues.

1.  A large number of bonuses are not made for financial reasons.
2.  There is strong evidence for the existence of either insider trading or insider inspired trading prior to bonus announcement.
3.  Local investors/speculators do chase after bonuses.
4.  There is strong evidence of heavy selling after bonus announcements have been made. 

What this means in plain terms is that the typical investor who buys the stocks of a company undergoing bonus issue either just before (by basing his purchase on rumours) or just after the announcement of a bonus almost certainly ends up losing money on a relative basis.  That is, had he bought other shares, he certainly would have done better. 

This is totally unlike the US situation where buying the stocks after their splits would result in the investors being even with the market.

The only way to make money from bonuses locally is to be able to buy well before the bonus announcement (about 20 weeks before) and sell almost immediately after the announcement.  In that way, you would stand to make a lot of money.  But to do so consistently, you would need inside information on when a bonus issue is about to be announced. 

Ref:  Stock Market Investment by Neoh Soon Kean

Type : Announcement

Subject : KPJ HEALTHCARE BERHAD (“KPJ” or “COMPANY”)

- PROPOSALS

Contents : This announcement is dated 1 October 2009.

On behalf of the Board of Directors of KPJ (“Board”), AmInvestment Bank Berhad (a member of AmInvestment Bank Group) (“AmInvestment Bank”) wishes to announce that the Company proposes to undertake the following proposals:-

Proposed share split involving the subdivision of every existing one (1) ordinary share of RM1.00 each in KPJ into two (2) ordinary shares of RM0.50 each (“Shares”) in KPJ held by the entitled shareholders of the Company on an entitlement date to be determined and announced later (“Proposed Share Split”);

Proposed bonus issue of up to 105,525,308 new Shares (“Bonus Shares”), to be credited as fully-paid up by the Company, on the basis of one (1) Bonus Share for every four (4) Shares held by the entitled shareholders of the Company after the Proposed Share Split on an entitlement date to be determined and announced later (“Proposed Bonus Issue”); and

Proposed issue of up to 131,906,635 free warrants in KPJ (“Free Warrants”) on the basis of one (1) Free Warrant for every four (4) Shares held by the entitled shareholders of the Company after the Proposed Share Split and Proposed Bonus Issue on an entitlement date to be determined and announced later (“Proposed Free Warrants Issue”).

The Proposed Share Split, Proposed Bonus Issue and Proposed Free Warrants Issue shall collectively be referred to as “Proposals”. The Proposals are inter-conditional.

Kindly refer to the attachment for further details.

OSK Research ups KPJ target price

OSK Research ups KPJ target price

Tags: corporate exercise | KPJ | OSK Research

Written by Joseph Chin
Friday, 02 October 2009 11:09

KUALA LUMPUR: OSK Investment Research is maintaining a Buy on KPJ Healthcare with an upgraded target price of RM4.98 from RM4.39 previously, after rolling its earnings per share (EPS) from FY09 to FY10 at 10 times price-to-earnings ratio (PER).

It said on Oct 2, despite the recent share price appreciation, KPJ is still trading significantly below its regional peers, which are trading at around 15 times to 25 times PER.

"We maintain our view that KPJ is an excellent choice for portfolio balancing as well as a long term investment given its relatively defensive business and steady dividend payout," it said.

On Oct 1, KPJ announced on Bursa Malaysia that it is proposing to undertake several corporate exercises involving a proposed 1-to-2 share split, bonus issue on the basis of 1 for 4 and a proposed issuance of up to 131.906m free warrants.

"While the proposals will not have direct impact on KPJ’s business operation, we welcome the news as we believe that the move could potentially improve the stock’s liquidity and marketability.

"Although we are unable to quantify the impact on liquidity, the proposals - which will result in a bigger share base – may potentially ease concerns over its current share liquidity," it said.

Following the completion of the proposals, KPJ’s share base will triple to around 659.53 million shares from 211.05 million shares currently.

OSK Research said nevertheless, the effectiveness of the proposals in improving liquidity in the shares will be dependent on the shares’ free float, which is in turn determined by the stake held its major shareholders.


http://www.theedgemalaysia.com/business-news/150474-osk-research-ups-kpj-target-price-.html

MIDF Research reiterates buy call on KPJ

MIDF Research reiterates buy call on KPJ

Tags: Brokers Call | KPJ | MIDF Research

Written by Financial Daily
Friday, 31 July 2009 11:17

MIDF Research reiterated its buy recommendation on KPJ HEALTHCARE BHD [ KPJ 3.300 0.040 (1.227%) ] at RM3.06 with a target price of RM3.90 after the healthcare provider proposed to acquire an abandoned hospital building in Kapar, Klang for RM38 million to be developed as a private specialist hospital.

The research house maintained its FY09 and FY10 forecasts for KPJ under the assumption that the hospital would only show meaningful contribution to KPJ’s topline from FY12 onwards, while earnings would be about three to four years later.

KPJ’s wholly-owned Kumpulan Perubatan (Johor) Sdn Bhd has proposed to acquire Bandar Baru Klang Medical Centre building (BBKLC) for RM38 million cash.

The property is a partially completed six-level purpose-built private specialist hospital building with two levels of basement car park. CONSTRUCTION [Not Available] had been stalled since the Asian financial crisis in 1998.

MIDF said the further development cost was estimated at RM70 million, with expected completion by 2011. The acquisition will be funded via internally generated funds and/or borrowings.

The research house estimated that the new hospital, with its gross floor development area of 355,014 sq ft, would have about 200 beds, based on the gross floor area comparison with other KPJ hospitals.

The announcement of the acquisition came as a surprise given that KPJ had just announced the construction of a new hospital in Tanjung Lumpur, Kuantan last week, which is expected to commence operations by 2011, said MIDF.

“Besides, management has guided that their expansion strategy is to add one new hospital every year into their existing network.”

It added that as BBKMC would be KPJ’s first hospital in Klang, it could penetrate a lucrative private healthcare market with a substantial 1.05 million population.

The research house, however, was neutral on the overall development due to stiff competition and disadvantages of KPJ being a latecomer.

It said there are quite a few private hospitals in Klang, for instance, Pantai Klang Specialist, Sri Kota Medical Centre and Arunamari Specialist Medical Centre.

“From the long term, potential to capture the market share still exist, capitalising on KPJ’s strong brand name,” it said.

After incorporating KPJ’s capital expenditure assumption of RM100 million per annum, MIDF believed that funding was not an issue to KPJ to undertake further expansion in the future, backed by healthy net operating cash flow (averaged at RM150 million in the past two years).

“Although net gearing is expected to increase from current 0.2 times resulting from the recent acquisition, KPJ is still able to manage it at comfortable levels,” it added.

The research house said its buy call and target price was based on nine times FY09 price-earnings ratio (PER) or equivalent to 40% discount to the regional sector average of 15 times.

“We believe that our target price has already factored in KPJ’s lower earnings before interest and tax margin, which is 40% lower as compared to average regional peer’s of about 16%.

“Dividend yield of 5.7%-6.4% for FY09-10 are relatively attractive, taking into account current low interest rate environment,” it said.

With the favourable future outlook, underpinned by network expansion and increasing demand for private healthcare services, KPJ was definitely a compelling choice for long-term investment, said the research house.

“In addition, the Employees Provident Fund (EPF) is now KPJ’s third largest shareholder with 5.2% equity stake, after acquiring 10.9 million shares from the open market on July 8, according to the filing to Bursa Malaysia.

“Emergence of a strong institutional investor like EPF is another plus point to KPJ,” it said.

Yesterday, KPJ put on eight sen to close at RM3.14.


This article appeared in The Edge Financial Daily, July 31, 2009.