Results Review
Share price: RM4.18
Target price: RM5.10
Niche specialist with regional dreams Initiate
Initiate coverage with BUY and target price of RM5.10. KPJ is wellpositioned
to benefit from the fast-growing healthcare sector in
Malaysia. This sector has been identified as one of the 12 key pillars in
the country‟s Economic Transformation Programme and is expected to
contribute USD10.4b to the Gross National Income by 2020. As a
defensive play, KPJ also offers limited revenue downside given its
domestic dominance and a wide array of positive demand factors.
Entrenched market leader. KPJ operates 20 private hospitals in
Malaysia, the largest network among local private hospital operators,
and has a 19% share of total private hospital beds. As the leader of the
domestic market, it stands to reap the greatest benefits from the rising
healthcare needs of the local population.
Limited revenue downside. The ever-growing demand for private
healthcare services in Malaysia limits the downside risk to revenue for
KPJ. This relatively inelastic demand is underpinned by structural
factors such as the increased number of elderly people, growing
population, higher per capita income and strain on public-sector
healthcare system.
New hospitals, new foreign patients. KPJ plans to add 1-2 hospitals
each year in its efforts to expand its hospital network. By end-2013,
KPJ could have added up to five new hospitals, and expanded its bed
capacity by up to 35%. We also expect the company to compete more
aggressively for foreign patients in the medical tourism sector. Its
education business could also serve as another thrust for growth.
Cheapest valuation, highest dividend yield. KPJ is the cheapest
hospital stock vis-à-vis its regional peers, trading at FY12F PER of
18.1x vs the peer average of 22.3x. Nevertheless, it offers the highest
yield at 2.4% net. We expect revenue growth of 13-18% over FY11-13
as its hospital network expands and it becomes a bigger player in
medical tourism. Corresponding net profit would grow by 8-19% over
the same period. Initiate coverage with BUY and TP of RM5.10, based
on 22x PER on FY12F fully diluted EPS, pegged to peer average.
(Information from MBB Investment Bank)
Wednesday, 30 November 2011
Malaysia Airports Holdings RM6.09: Buy
Results Review
Share price: RM6.09
Target price: RM7.55
KLIA2 no longer a low cost terminal
Management comes clean. MAHB, at an analyst briefing yesterday,
revealed the latest development of KLIA2. In a nutshell, the project size
is much bigger than originally planned with a capacity of 45m (versus
30m, +50% increase), completion date has been pushed to Apr 2013
(previous Oct 2012) and the project cost has soared to RM3.6-3.9b
(versus RM2.0-2.5b, +56%-80% increase). Management asserts new
IRR of >10% (our original estimate 13.2%). We are assessing the
impact to our earnings model and place MAHB under review.
Salient features. This project is no longer low cost; it has all the
amenities and features of a world class terminal. Among the salient
changes are: (1) fitted with aerobridges; (2) bigger terminal size (+71%)
to allocate separation of domestic and international passengers; (3) a
fully automated (semi, earlier) baggage system; (4) longer runway; and
(5) bigger (+131%) landside area to accommodate more aircraft parking
area. Upon completion, KLIA2 will be the world’s largest single terminal
capacity of 45m versus current record holder Dubai T3 with 43m.
Front end cashflow burden. In the original plan, KLIA2 is to be built
over 2-3 phases as the passenger traffic rises. But now, KLIA2 is to be
built to full scale in one go. Whilst we think this will yield better value
over the long-term, it will be a burden on MAHB’s cashflow in the initial
years. MAHB predicts that KLIA2’s maiden utilization rate of 49% (22m
pax) and will gradually increase to 70% 8 years later in 2021. KLIA2 will
look and feel spacious for the first 4-5 years.
Funding uncertainties may cap near-term share price. MAHB’s
current gearing ratio is at a comfy 0.77x and will peak at 0.90x in 2012,
we estimate. But with the higher KLIA2 project cost, this may jump to
1.07-1.16x assuming MAHB raises additional debt. The internal target
is for gearing to, not cross 1.0x, which implies a project debt drawdown
of up to RM3.1b, leaving another RM0.5b-RM0.8m to be funded from
internal funds and new equity. MAHB may discontinue dividends
temporarily or raise new equity – both avenues are not ruled out by the
management. We think that dividend uncertainties and the dilutive
impact from potential new equities may cap near-term share price.
(Information from MBB Investment Bank)
Share price: RM6.09
Target price: RM7.55
KLIA2 no longer a low cost terminal
Management comes clean. MAHB, at an analyst briefing yesterday,
revealed the latest development of KLIA2. In a nutshell, the project size
is much bigger than originally planned with a capacity of 45m (versus
30m, +50% increase), completion date has been pushed to Apr 2013
(previous Oct 2012) and the project cost has soared to RM3.6-3.9b
(versus RM2.0-2.5b, +56%-80% increase). Management asserts new
IRR of >10% (our original estimate 13.2%). We are assessing the
impact to our earnings model and place MAHB under review.
Salient features. This project is no longer low cost; it has all the
amenities and features of a world class terminal. Among the salient
changes are: (1) fitted with aerobridges; (2) bigger terminal size (+71%)
to allocate separation of domestic and international passengers; (3) a
fully automated (semi, earlier) baggage system; (4) longer runway; and
(5) bigger (+131%) landside area to accommodate more aircraft parking
area. Upon completion, KLIA2 will be the world’s largest single terminal
capacity of 45m versus current record holder Dubai T3 with 43m.
Front end cashflow burden. In the original plan, KLIA2 is to be built
over 2-3 phases as the passenger traffic rises. But now, KLIA2 is to be
built to full scale in one go. Whilst we think this will yield better value
over the long-term, it will be a burden on MAHB’s cashflow in the initial
years. MAHB predicts that KLIA2’s maiden utilization rate of 49% (22m
pax) and will gradually increase to 70% 8 years later in 2021. KLIA2 will
look and feel spacious for the first 4-5 years.
Funding uncertainties may cap near-term share price. MAHB’s
current gearing ratio is at a comfy 0.77x and will peak at 0.90x in 2012,
we estimate. But with the higher KLIA2 project cost, this may jump to
1.07-1.16x assuming MAHB raises additional debt. The internal target
is for gearing to, not cross 1.0x, which implies a project debt drawdown
of up to RM3.1b, leaving another RM0.5b-RM0.8m to be funded from
internal funds and new equity. MAHB may discontinue dividends
temporarily or raise new equity – both avenues are not ruled out by the
management. We think that dividend uncertainties and the dilutive
impact from potential new equities may cap near-term share price.
(Information from MBB Investment Bank)
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