KPJ Healthcare Bhd. : Perhaps not at a price to hold

KPJ Healthcare Bhd. relative valuation is now OVERVALUED. It was previously rated UNDERVALUED, and has a fundamental analysis score of 39.

Our analysis is based on comparing KPJ Healthcare Bhd. with the following peers – Bangkok Chain Hospital Public Co., Ltd., Bumrungrad Hospital Public Co., Ltd. NVDR, Bangkok Dusit Medical Services Public Co. Ltd.(Alien Mkt) and Thai Nakarin Hospital Public Co. Ltd. NVDR (BCH-TH, BHP.R-TH, BDMS.F-TH and TNH.R-TH).

Relative Valuation

KPJ Healthcare Bhd.’s price of MYR 4.21 is greater than CapitalCube’s implied price of MYR 3.56. At this level, CapitalCube believes that KPJ Healthcare Bhd. is overvalued. Over the last 52 week period, the stock has fluctuated between MYR 2.97 and MYR 4.21.

Relative Valuation

Company Overview

  • Relative outperformance over the last year and the last month suggest a leading position.
  • KPJ Healthcare Bhd.’s current Price/Book of 3.27 is about median in its peer group.
  • The market expects 5878-MY‘s earnings to grow at about the same rate as its chosen peers and also does not seem to expect much improvement in its below peer median returns.
  • 5878-MY has relatively low profit margins and median asset efficiency.
  • The company’s year-on-year change in revenues and earnings are better than the median among its peer group.
  • 5878-MY‘s return on assets currently and over the past five years has trailed the peer median and suggests the company might be operationally challenged relative to its peers.
  • The company’s median gross margin and relatively low pre-tax margin suggest high operating costs versus peers.
  • 5878-MY‘s revenue growth in recent years and current PE ratio are both around their respective peer medians suggesting that historical performance and long-term growth expectations for the company are largely in sync.
  • The company’s capital investment program and to-date returns suggest that the company is likely making big bets on the future.

Investment Outlook

KPJ Healthcare Bhd. has a fundamental score of 39 and has a relative valuation of OVERVALUED.

KPJ Healthcare Bhd. is on the bottom right quadrant of CapitalCube’s Value – Price Matrix. We therefore classify KPJ Healthcare Bhd. as ‘Speculative’. In other words, not only is KPJ Healthcare Bhd.’s Fundamental Analysis Score low at 39, but it is also potentially overvalued, in that it trades at a price higher than its CapitalCube Implied Price of 3.56.

Fundamentals Vs Relative Valuation

Drivers of Valuation

The market does not expect much improvement in 5878-MY‘s currently below median returns.

The market expects 5878-MY to grow earnings about as fast as the median of its chosen peers (PE of 31.66 compared to peer median of 31.66) but not to expect much improvement in its below peer median rates of return (ROE of 11.07% compared to the peer median ROE of 16.25%).

The company’s current Price/Book of 3.27 is about median in its peer group.

Valuation Drivers

5878-MY has moved to a relatively low ROE from a Turnaround profile at the prior year-end.

ROE % (On Common Equity)
Price To Earnings

Peer Analysis

A complete list of valuation metrics is available on the company page.

Company Profile

KPJ Healthcare Bhd. is an investment holding company, which engages in the provision healthcare services and management services. It operates through the Operation of Specialist Hospitals segment. The firm also offers support services such as pathology and laboratory service; and marketing and distribution of pharmaceutical, medical, and surgical products. It also operates a private university college of nursing and allied health. The company was founded on August 18, 1992 and is headquartered in Kuala Lumpur, Malaysia.

Disclaimer

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