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Tuesday, March 04, 2014

KPJ: bottom-line starting to improve

Result Update

For QE31/12/2013, KPJ's net profit rose 69% q-o-q but dropped marginally by 2% y-o-y to RM32.7 million while revenue rose 12% q-o-q or 24% y-o-y to RM634 million.

The q-o-q increase in revenue was due to 24%-increase in revenue from the Malaysian segment, which is in turn due to higher revenue from the existing Malaysian hospitals and the newly open Malaysian hospitals plus 8%-increase in revenue from Support Services segment. These had more than offset the 14%-drop in revenue from the Indonesian segment and 33%-drop in revenue from the Aged Care Facility segment.

The increase in the profit before tax is due to increase in revenue and contributions from the hospitals in the current quarter and recognition of gain on fair value adjustments in relation to investment properties of an associate, Al-Aqar Healthcare REIT, amounting to RM9.2 million


Table 1: KPJ's last 8 quarterly results


Chart 1: KPJ's last 28 quarterly results   

Valuation

KPJ (closed at RM3.29 yesterday) is now trading at a PE of 19 times (based on last 4 quarters' EPS of 17.25 sen). If the recognition of gain on fair value adjustments in relation to investment properties of an associate, Al-Aqar Healthcare REIT, amounting to RM9.2 million is excluded EPS would drop 15.8 sen while PE would rise to 21 times. At these PE multiples, KPJ is deemed fully valued.

Technical Outlook

KPJ's technical outlook has turned bearish since it broke its long-term uptrend line at RM4.00 in mid-2013. Its immediate support levels are the horizontal lines at RM3.10 & RM2.50.


Chart 2: KPJ's weekly chart as at Mar 3, 2014 (Source: Tradesignum)

Conclusion

Despite the high valuation & bearish technical outlook, KPJ is rated as a HOLD as its financial performance is slowly improving.

Note:
In addition to the disclaimer in the preamble to my blog, I hereby confirm that I do not have any relevant interest in, or any interest in the acquisition or disposal of, KPJ.

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