KPJ’s medical tourism revenue to be enhanced

KUALA LUMPUR: KPJ Healthcare Bhd could capitalise on medical tourism to drive patient numbers into its newly built Damansara Specialist Hospital 2 (DSH2).

This is seen from its appointment of Sherene Azli as the group’s new chief marketing officer in November 2023.

Sherene was previously the chief executive officer of the Malaysia Healthcare Travel Council for six years.

“Sherene’s experience should prove invaluable to galvanising KPJ’s medical tourism revenue.

“This will aid DSH2 in breaking even, with a continual ramp-up from its 30% medical tourism contribution to revenue target in 2023 to 50% in 2025,” UOB Kay Hian (UOBKH) Research said in a report yesterday.

KPJ’s medical tourism revenue is expected to rake in RM200mil in 2023 and is subsequently targeted to grow by 50% to 75% in 2024, it said.

It is also expecting a breakeven of the group’s five loss-making hospitals at Perlis, Miri, Batu Pahat, Bandar Dato’ Onn and DSH2.

“Among these, the Miri, Perlis and DSH2 hospitals are expected to achieve overall profitability, while the remaining two are expected to attain operational profitability by the end of 2024,” it said.

“Additionally, plugging of leakages and cost optimisation are expected to aid KPJ in achieving its long-term earnings before interest, taxes, depreciation, and amortisation margin target of 28%, compared to 2023’s forecast of 23%,” UOKBKH Research added.

It noted that KPJ continues to offer highly visible earnings growth and the further gestation of its loss-making hospitals from organic patient throughput and an anticipated improvement in foreign medical contributions should help drive growth for the group over the near term.

Due to this improved execution expectations, UOBKH Research has maintained its “buy” call and is raising KPJ’s target price to RM1.75 from RM1.40, based on its pre-pandemic five-year mean price-to-earnings ratio.

Following the Indonesian hospital sale, it noted that the only remaining loss-making asset is KPJ’s Hospital and Nursing College in Bangladesh, which is slated for sale in the first half of 2024.