Latest news with #RM241mil
The Star
a day ago
- Business
- The Star
KPJ earnings outlook likely to remain resilient
PETALING JAYA: Maybank Investment Bank (IB) Research expects KPJ Healthcare Bhd 's earnings outlook to remain resilient, underpinned by expected volume recovery in the second half of the year, rising case complexity and cost optimisation efforts. It added that the further delay in the diagnosis-related group (DRG) system is positive as it leaves earnings potential uncapped for the near-term. Last year, the Health Ministry said it was considering implementing a DRG system to help manage rising healthcare costs, particularly in private hospitals. The research house viewed KPJ's asset monetisation and lease renewal exercise as a strategic effort to unlock capital and support its 6,000-bed target by 2030. KPJ recently launched a 60-bed hospital in Kuala Selangor as part of its organic expansion, supporting progress towards its 6,000-bed financial year 2030 (FY30) target. 'Alongside five other hospitals under gestation (four are earnings before interest, taxes, depreciation, and amortisation or ebitda positive), this could pose near-term earnings upside,' it said. On July 8, KPJ said it had fulfilled all conditions precedent of the sale and purchase agreements related to its proposed sale and leaseback, as well as lease renewal. The sales and leaseback agreement for the new wings of KPJ Ampang Puteri and KPJ Penang for RM241mil cash. Maybank IB Research said KPJ has historically injected assets into its 34%-owned associate Al-Aqar Healthcare REIT to unlock asset value while retaining operational control via leasebacks. It said apart from the injection of these new hospital wings, the resolution also includes lease renewals on existing leaseback properties with Al-Aqar for KPJ Penang, KPJ Seremban, Taiping Medical Centre, KPJ Healthcare University and KPJ Healthcare College Penang, The research house maintained its FY25 to FY27 ebitda margin forecast of 24% as it leaves earnings estimates unchanged on potential impact of 8% sales and service tax (SST) on leases, pending clarity on possible business-to-business exemption. It has, however, trimmed FY25 to FY27 earnings by 2%, 4% and 4%, respectively. The research house is 'neutral' on the SST expansion of 6% on foreign patients, and 8% on leased assets. 'For the latter, we believe there is a possibility for KPJ to be eligible for exemptions,' it said.
The Star
12-06-2025
- Business
- The Star
KPJ Healthcare likely to face challenges
PETALING JAYA: KPJ Healthcare Bhd is likely to face a tougher business environment from July 2025, as the expanded sales and service tax (SST) is expected to raise its rental and medical tourism costs. In a note to clients, MIDF Research highlighted that KPJ had injected two hospital properties – a 15-storey building at KPJ Ampang Puteri and a 10-storey building at KPJ Penang – into Al-'Aqar Healthcare REIT for a total of RM241mil. Under the agreement, KPJ would lease KPJ Ampang Puteri for 11 years and KPJ Penang for 15 years, with an annual rental increment of 2% and the option to extend the lease for another 15 years. The brokerage pointed out: 'The rental for these two assets will be charged at approximately RM15mil in 2025 as a baseline. With the implemented SST, we opine the net charge would be about RM16mil. 'However, it should be noted that any contracts signed before the date of implementation will be exempted from SST for a year. Hence, 2026 rental is estimated to be nearly RM17mil. By 2040, we expect the rental for these two assets to reach about RM22mil,' it added. MIDF Research also noted that KPJ had previously injected 19 out of its 30 hospitals into Al-'Aqar, with the 2024 lease, excluding the two newly injected assets, amounting to over RM107mil. The RM100mil debt repayments would mitigate additional costs from the sale-and-leasebacks, while the additional working capital of RM139mil would support operational improvements. 'We believe the short-term support will streamline KPJ's financial performance amid the economic headwinds and policy changes,' it said. On medical tourism, MIDF Research estimated that SST would add RM24mil to RM32mil per annum in tax expenses, given that around 9% to 12% of KPJ's revenue stemmed from this segment. 'We noted that this could increase the cost of treatment, subsequently reduce KPJ's competitiveness with other domestic and regional players and increase price sensitivity,' it explained. The research house revised its earnings forecast for 2025-2027 downwards by 1%, adjusting its target price to RM3 from RM3.02, pegging on a price-earnings ratio of 28.8 times to the revised estimated earnings per share of 10.4 sen. 'Considering that the impact of the SST is minimal on the group's forecast results, we maintain our 'neutral' call on KPJ,' it said.
