KUALA LUMPUR: RHB Research Bhd has raised its 2023 and 2024 earnings forecasts for KPJ Healthcare Bhd by 43 per cent and 49 per cent respectively to account for organic patient growh and improvements in operating efficiency.
The firm said Damansara Specialist Hospital 2 (DSH2) was said to have incurred a net loss of RM25 million in the fourth quarter (Q4) of 22, and RM61 million net loss as at December 2022 after making its debut in September 2022.
"Management expects the empanelment of AIA (targeted completion by March) to offer further room for bed occupancy rate growth (other common insurers have completed empanelment).
"KPJ maintained its target for DSH2 to achieve pre-tax earnings breakeven in 2023, underpinned by the differentiated service offerings, and as the key driver for healthcare tourism for the group," it said.
Health tourism leaped 63 per cent year-on-year (YoY) to RM134 million in 2022, accounting for 4.6 per cent of 2022 revenue, despite only reaping the full benefits for nine months.
The robust health tourism performance was mainly driven by the return of affluent Indonesian customers.
"Moving forward, KPJ plans to deepen its channel partner collaboration, empanelment of foreign insurers, as well as expand its footprint within the secondary market to achieve its long-term health tourism revenue contribution target of 20-30 per cent," it added.
RHB Research said the disposal of KPJ's Indonesia's business was expected to be completed by June, with the group set to enter a share sale agreement.
Potential earnings accretion from the disposal could yield three per cent upside to RHB Research's 2023 earnings forecast, based on the net loss of RM7.7 million.
"The disposal will not have a meaningful impact on KPJ's health tourism revenue, given the differentiated health tourism services provided, while KPJ's Malaysia medical tourists are not interrelated as its Indonesia clients are mostly from Aceh, Bukit Tinggi and Batam.
"We expect KPJ to sustain its earnings growth, anchored by the improvement in operating efficiency (KPJ has several new hospitals nearing the end of their gestation period) and gradual increase in health tourism contribution," it added.
It maintained "Buy" on the stock with a target price of RM1.50.