KUALA LUMPUR: KPJ Healthcare Bhd’s five new hospitals opened over the past few years are expected to turn profitable this year with room for margin to improve.
AllianceDBS Research said the hospitals had all turned EBITDA (earnings before interest, taxation, depreciation and amortisation) positive, with only KPJ Bandar Maharani specialist hospital and KPJ Sabah specialist hospital registering net losses at present.
The firm said the latter two were expected to turn profitable towards the later part of the year.
"We are positive that the increased contributions from these hospitals will help to sustain the earnings growth of the group going forward," AllianceDBS said in a note today.
KPJ Perlis specialist hospital commenced its operations on May 16 while KPJ Bandar Dato’ Onn Specialist Hospital is expected to open by the fourth quarter.
AllianceDBS said KPJ was planning to open four new hospitals and increase the number of beds in some of its existing hospitals between 2018 and 2019.
“We expect the number of its operating beds to grow from 3,052 in 2017 to 3,607 in 2020.
“Despite the challenging conditions experienced by KPJ since 2015, we remain optimistic that healthcare demand is on a secular growth trend, driven by a rising population and increasing household income,” it said.
The firm noted that it will be difficult for the domestic public healthcare system to cope with the growing demand as capacity constraints are expected to worsen.
“This would drive affluent patients to the private hospitals. KPJ stands to benefit from this trend, given its nationwide hospital network and ample capacity to meet growing demand with capacity utilisation at 65 per cent in FY17," AllianceDBS added.
Backed by the secular growth in healthcare demand, AllianceDBS expects patient throughput to grow between one and two per cent , which represents a recovery from the contractions and a relatively modest 0.5 per cent growth in FY17.
“Our estimation of two per cent growth in patient throughput for FY18 is supported by increased operating bed, and strengthening of economic activities to improve healthcare affordability,” it added.
KPJ’s revenue is made up of three major components namely hospital charges, consultation fees, and product sales.
Inpatient revenue typically comprises all three components, while consultation fees and product sales make up the bulk of outpatient revenue.
“We forecast that revenue for inpatient and outpatient will grow at CAGRs of 8 per cent and 7 per cent, respectively on the back of increasing revenue intensity and medical cost inflation,” AllianceDBS said.