KUALA LUMPUR: Hong Leong Investment Bank (HLIB) research has downgraded KPJ Healthcare Bhd to a "Hold" despite its financial year 2023 results meeting expectations, due to a 25 per cent run-up in its share price since its last report.
KPJ's fourth quarter 2023 core profit after tax and minority interest (Patami) of RM63.3 million (-5.5 per cent quarter-on-quarter (QoQ), -9.9 per cent year-on-year (YoY) brought financial year 2023's Patami to RM226.1 million (+31.6 per cent YoY).
The performance was well within the firm's and consensus estimates, at 101 per cent/97 pe rcent of full year forecast. Core PATAMI was arrived at after adjusting for extraordinary items, mainly gain on disposal amounting to RM20.2 million.
"Our sum-of-the-parts-derived target price is raised to RM1.70 (from RM1.57), as we roll over our valuation to FY24 forecast. "However, given that share price has risen 25 per cent since our previous report, we believe the positives have been priced in at this juncture. Hence, we downgrade our rating to Hold," it stated.
HLIB research said KPJ has shifted its focus from brownfield projects to new hospital openings.
In the near term, KPJ aims to add 368 beds (+9.9 per cent) bringing the total to 4,101 beds.
The firm said given the government emphasis on inter-sectoral collaboration, KPJ's extensive presence positions it well to benefit from the government's initiative to procure more hospital care services from the private sector.
"Notably, KPJ secured a 52 per cent share of the RM100 million budget allocated for such services during the pandemic," it said in a note.