Stock Name: KPJ
Company Name: KPJ HEALTHCARE BHD
Research House: RHB
KPJ Healthcare Bhd
(March 10, RM2.62)
Maintain outperform at RM2.57, fair value at RM3.20: KPJ is selling off three hospital buildings - RS Bumi Serpong Damai, Kluang Utama Specialist Hospital and Bandar Baru Klang Specialist Hospital to Al-Aqar KPJ REIT (KPJ REIT) for RM138.8 million to be satisfied with RM83.3 million cash and 56.6 million new units in KPJ REIT at an issue price of 98 sen and a 5.8% discount to its NAV (net asset value) of RM1.04 as at Feb 25, 2010.
The transaction will result in a one-off gain of RM3.36 million or an earnings improvement by 2.9% to the revised net profit forecast, increase KPJ's stake in KPJ REIT from 301.4 million units or 42.8% (after the completion on acquisition of Tawakal Hospital) to 358.1 million units of 50.9% and reduce KPJ's net debt and gearing from RM222.7 million and 0.36 time as at Dec 2009 to RM142.7 million and 0.23 time.
We are positive on KPJ's latest move as it is consistent with its strategy to continuously "recycle" its capital to drive growth, that is to partially cash out while maintaining control of its hospital assets by injecting them into KPJ REIT, and ploughing back the cash to fund further acquisitions.
We also think that the transaction price for the three hospital buildings is fair given that it is transacted at market value according to PT Penilai/Collier International.
We tweaked our earnings forecasts up by 0.2%-0.3% for financial year ending Dec 31, 2010 (FY10) to FY12 to reflect interest and depreciation savings and higher associate contributions, which would more than offset the increase in rental expense. We do not factor the RM3.36 million one-off gain in our forecast.
We maintain our outperform call on KPJ with fair value of RM3.20 based on 14.5 times FY12/10 earnings per share (EPS), in line with our 14.5 times target price earnings (PE) for the consumer sector.
We like KPJ as valuations remain lower than the regional peers average PER of 17 times; and rising affluence and higher take-up of insurance policies in Malaysia. Our target PE is on the high end of its historical five-year PE band of between five and 15 times. - RHB Research Institute, March 10
This article appeared in The Edge Financial Daily, March 11, 2010.
Company Name: KPJ HEALTHCARE BHD
Research House: RHB
KPJ Healthcare Bhd
(March 10, RM2.62)
Maintain outperform at RM2.57, fair value at RM3.20: KPJ is selling off three hospital buildings - RS Bumi Serpong Damai, Kluang Utama Specialist Hospital and Bandar Baru Klang Specialist Hospital to Al-Aqar KPJ REIT (KPJ REIT) for RM138.8 million to be satisfied with RM83.3 million cash and 56.6 million new units in KPJ REIT at an issue price of 98 sen and a 5.8% discount to its NAV (net asset value) of RM1.04 as at Feb 25, 2010.
The transaction will result in a one-off gain of RM3.36 million or an earnings improvement by 2.9% to the revised net profit forecast, increase KPJ's stake in KPJ REIT from 301.4 million units or 42.8% (after the completion on acquisition of Tawakal Hospital) to 358.1 million units of 50.9% and reduce KPJ's net debt and gearing from RM222.7 million and 0.36 time as at Dec 2009 to RM142.7 million and 0.23 time.
We are positive on KPJ's latest move as it is consistent with its strategy to continuously "recycle" its capital to drive growth, that is to partially cash out while maintaining control of its hospital assets by injecting them into KPJ REIT, and ploughing back the cash to fund further acquisitions.
We also think that the transaction price for the three hospital buildings is fair given that it is transacted at market value according to PT Penilai/Collier International.
We tweaked our earnings forecasts up by 0.2%-0.3% for financial year ending Dec 31, 2010 (FY10) to FY12 to reflect interest and depreciation savings and higher associate contributions, which would more than offset the increase in rental expense. We do not factor the RM3.36 million one-off gain in our forecast.
We maintain our outperform call on KPJ with fair value of RM3.20 based on 14.5 times FY12/10 earnings per share (EPS), in line with our 14.5 times target price earnings (PE) for the consumer sector.
We like KPJ as valuations remain lower than the regional peers average PER of 17 times; and rising affluence and higher take-up of insurance policies in Malaysia. Our target PE is on the high end of its historical five-year PE band of between five and 15 times. - RHB Research Institute, March 10
This article appeared in The Edge Financial Daily, March 11, 2010.
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