MALAYSIA KPJ Healthcare - listed companykpj.listedcompany.com/misc/analyst/Macquarine... ·...

Please refer to the important disclosures and analyst certification on page 2 and the inside back cover of this

document, or on our website www.macquarie.com.au/disclosures.

MALAYSIA

KPJ MK Outperform

Price (at CLOSE#, 05 Sep 2012) RM6.27

12-month target RM 7.10

Upside/Downside % 13.2

Valuation RM 5.20-7.60 - Sum of Parts

GICS sector Health Care Equipment & Services

Market cap RMm 3,988

30-day avg turnover US$m 1.3

Market cap US$m 1,282

Number shares on issue m 636.1

Investment fundamentals

Year end 31 Dec 2011A 2012E 2013E 2014E

Revenue m 1,909.0 2,068.9 2,314.2 2,598.9

EBIT m 159.2 179.3 210.0 244.8

EBIT growth % 10.5 12.6 17.1 16.6 Reported profit m 143.7 153.0 178.9 206.8 Adjusted profit m 143.7 153.0 178.9 206.8 EPS rep sen 26.3 23.2 27.1 31.4 EPS rep growth % 16.5 -11.8 16.9 15.6 EPS adj sen 26.3 23.2 27.1 31.4 EPS adj growth % 16.5 -11.8 16.9 15.6 PER rep x 23.8 27.0 23.1 20.0 PER adj x 23.8 27.0 23.1 20.0 Total DPS sen 12.0 11.6 13.6 15.7 Total div yield % 1.9 1.8 2.2 2.5 ROA % 8.7 8.8 9.6 10.4

ROE % 17.3 15.4 15.7 16.7 EV/EBITDA x 12.9 14.1 12.2 10.6 Net debt/equity % 19.1 10.5 8.1 3.8 P/BV x 3.8 3.8 3.5 3.2

Source: FactSet, Macquarie Research, September 2012

(all figures in MYR unless noted)

Analyst(s) Chi Hoong Ng +60 3 2059 8985 [email protected] Yeonzon Yeow +60 3 2059 8982 [email protected]

10 September 2012 Macquarie Capital Securities (Malaysia) Sdn. Bhd.

KPJ Healthcare An undervalued healthcare leader Initiate with Outperform, RM7.10 target price

We initiate coverage of KPJ Healthcare (KPJ), the largest private hospital

network operator in Malaysia (by number of hospitals) with an Outperform

recommendation based on 12-month sum-of-parts target price of RM7.10,

implying 13% upside from current levels and FY13E and FY14E PER of 23x and

20x, respectively. Despite no official dividend policy, we expect KPJ to continue

paying 50% of its net profit on a quarterly basis, which implies a 2.2% FY13E

dividend yield.

Driver 1: Benefiting from the public-to-private switch

Supported by the rise in income and increased acceptance of medical insurance,

private healthcare has become accessible to the public. Private healthcare

operators like KPJ should also continue to benefit from overcrowded public

hospitals, as more than 80% of the healthcare budget is dedicated to supporting

public hospital operating expenditures. Despite the demand increase, new entry

is limited by the zoning requirements implemented by the Private Healthcare

Facilities and Services Act 1998 which limits the numbers of bed counts within

an area.

Driver 2: Growing edge in captive market

Capitalising on its market share advantage, KPJ has been acquiring hospitals

around the nation to enter new markets while strengthening its number-one

position. By disposing the hospital assets to its associate Al-Aqar Healthcare

REIT, KPJ is able to unlock part of the investment value upfront while continuing

with its acquisitions, without the need to raise additional funds. Al-Aqar

Healthcare REIT is the only healthcare-focused REIT in Malaysia.

Driver 3: The blue-sky scenario – RM7.60 (21% upside)

There could be more upside to our base-case scenario target price of RM7.10,

as we assume that the three new hospitals beginning operation this year will only

start to positively contribute in 2014. We believe that the scenario could change,

as KPJ was able turn around KPJ Kajang within a year of operation. If such a

scenario were repeated, we could see potential upside to RM7.60.

Driver 4: Historical valuations no longer valid

Our implied valuation is demanding compared to KPJ‟s historical average;

however, the stock fundamentals have significantly changed from two years ago.

With JCorp trimming its stake from 81% in 2002 to the current 41% and the

listing of IHH Healthcare (IHH MK, Not Rated) , liquidity and interest in KPJ stock

have improved significantly. Another rerating catalyst could also be a JV or M&A

with a Singapore-based medical group providing the potential to gain access to

Singaporean treatment in Malaysia paid by Medisave.

The Malaysia healthcare stock

For investors seeking to invest in the growing Malaysia healthcare market, we

believe that KPJ, with its Malaysia-focused operation and undemanding 23x

FY13E PER with a 2.2% div yield (vs IHH at 33x consensus FY13E PER with no

dividend upside) is a compelling opportunity.

Macquarie Research KPJ Healthcare

10 September 2012 2

Inside

An undervalued healthcare leader 3

Valuation, recommendation, risks 6

Benefiting from the public to private switch12

Growing edge in a captive market 16

Unsuspected derivative play on interest

rate 19

Malaysia Healthcare and its future 20

KPJ shareholding chart

*JCorp shareholdings includes Waqaf An-Nur Corp stake As of 30 April 2012

Source: Company data, Macquarie Research, September 2012

KPJ number of patients trend


KPJ MK rel KLCI performance, & rec history

Note: Recommendation timeline - if not a continuous line, then there was no Macquarie coverage at the time or there was an embargo period.

Source: FactSet, Macquarie Research, September 2012 (all figures in MYR unless noted)

KPJ Healthcare Berhad (KPJ MK) Company profile

KPJ Healthcare Berhad (KPJ) is a leading private healthcare provider in

Malaysia with 21 hospitals in Malaysia and two in Indonesia. With more than

2,600 licensed beds, KPJ currently owns the largest private-hospital network

in Malaysia. In 2011, KPJ treated 2.4m outpatients and 240,000 inpatients

through its network hospital.

As the availability of new hospital sites becomes more limited within the city

boundaries, private operators are now either working with property developers

or going further inland to expand their presence. We think KPJ‟s acquisition

growth strategy is viable as the risk associated with it is lower than setting up

new sites. Despite the government‟s focus on transforming Malaysia into a

medical-tourism destination, we believe this is a long-term plan, as Malaysia

is less competitive in services compared to peers.

Fig 1 KPJ‟s operation snapshot


KPJ started as the healthcare division of state-owned Johor Corporation

(JCorp) in 1981. In 1994, JCorp decided to list KPJ as the first listed healthcare

group in Bursa, Malaysia. Currently, JCorp owns 45% of KPJ shares.

Key Management and Directors

Kamaruzzan Abu Kassim, Chairman

Kamaruzzaman, aged 48, was appointed as a Non-Independent Non-

Executive Director of KPJ on 3 January 2011 and subsequently as Chairman

of KPJ on 12 January 2011. He is currently the President & Chief Executive

Officer of Johor Corporation (JCorp).

Datuk Paduka Siti Sa‟diah Sheikh Bakir, Managing Director

Siti Sa‟diah, aged 59, graduated with a Bachelor of Economics from the

University of Malaya in 1974 and holds an MBA from Henley Management

College, University Reading, UK. Her career with Johor Corporation (JCorp)

commenced in 1974 and she has been directly involved with JCorp's

Healthcare Division since 1978.

She was appointed as the Chief Executive of Kumpulan Perubatan (Johor)

Sdn Bhd (KPJSB) from 1989 until the listing of KPJ in November 1994. She

has been the Managing Director of KPJ Healthcare Berhad (KPJ) since 1

March 1993.

Jcorp*

45%

EPF

11%

Foreign

12%

Others

32%

0

500

1,000

1,500

2,000

2,500

3,000

2000

2001

2002

2003

2004

2005

2006

2007

2008

2009

2010

2011

('000) Outpatients Intpatients


10 September 2012 3

An undervalued healthcare leader Initiating coverage with Outperform recommendation

We are initiating coverage of KPJ Healthcare (KPJ) with an Outperform recommendation and

a target price of RM7.10 based on our sum-of-parts methodology, which implies 13% upside

to the current share price. With the widest hospital network in Malaysia, we think KPJ is

poised to benefit from the overstretched public system. In addition, we think that the recent

listing of IHH Healthcare (IHH) has improved interest in KPJ stock, as investors view KPJ as

a pure Malaysia healthcare stock with an undemanding valuation.

Switching to private healthcare

Despite allocating a similar annual budget to the healthcare system, most of the funds have

shifted from capex to opex due to the rising operational costs of public hospitals. On average

only five hospitals were built over the last five years with public hospital beds only growing by

2% from 2006-2011. Unless the government decides to allocate more funding to the public

healthcare system, we believe that private providers will likely be big beneficiaries, as more

patients are forced to seek treatment with private operators, as the level of overcrowding at

public hospitals is expected to worsen.

Fig 2 More inpatients are now seeking medical treatment at private healthcare facilities

Based on number of inpatients: 3.0mn (2008) and 3.2mn (2011)

Source: MOH, Macquarie Research, September 2012 Source: MOH, Macquarie Research, September 2012

In our view, the rise in income and acceptance of medical insurance among Malaysians will

help improve affordability and hence increase demand for private healthcare. In addition,

Malaysia is expected to reach an aging population status by 2035 (aging population status is

defined by WHO as one where at least 10% of the population is above the age of 60). As

such, there could be another opportunity for KPJ to offer elderly-care services in Malaysia.

Al-Aqar Healthcare REIT, benefiting KPJ in two ways

The Private Healthcare Facilities and Services Act 1998 (the Act) governs all activity within

the private healthcare sector, which includes the building and expansion of new and

established private hospitals. Within the Act, the zoning requirement also limits the population

to number of beds ratio (1:500) within a 14km radius. The limitation benefits established

operators like KPJ as it limits the entry of new competitors. Capitalising on the Act‟s limits,

KPJ is has been making several acquisitions, acquiring at least one hospital annually from

2006 in an effort to either enter new markets or block competitors from entering the market.

We believe KPJ has a competitive edge as it has been able to „lighten‟ its balance sheet

and unlock the value of its hospital assets by disposing it to its associate, Al-Aqar

Healthcare REIT (Al-Aqar). With the REIT, KPJ can outbid its competitors (if needed)

knowing they can recoup part of their investment upfront, while improving the investment‟s

return. KPJ is the only operator to own a healthcare REIT in Malaysia.

Public

74%

Private

26%

2008

Public

72%

Private

28%

2011

The macro

environment looks

positive for

Malaysia private

healthcare player

Outperform

recommendation

with target price of

RM7.10, which

implies a 13% return

Al-Aqar benefits:

1) Lowering

investment

cost for KPJ

2) Potential

uplift in

overall

valuation


10 September 2012 4

There is an investment trend toward high-yielding companies that pay dividends from

strong defensive cash flow, to seek higher returns. We believe KPJ could be an indirect

beneficiary of this investment trend as its 49% owned Al-Aqar could potentially be valued

higher as it has similar earnings stability and dividend payout ratios to telco and consumer

stocks. If valued at 3.50% yield (vs the current yield at 5.2%), it would equate to an

additional 4% upside to our target price.

The bull case at RM7.60 implies 21% upside

Base case – RM7.10 (13% upside)

In our base-case scenario, we did not factor in any possible synergy from the two recently

acquired hospitals, Sabah Medical Centre (2010) and Sibu Specialist Medical Centre (2011)

in East Malaysia. As no new capacities have been installed over the past two years, we are

forecasting the number of outpatients and inpatients to grow moderately at 7.0% and 7.5% for

both 2012 and 2013, respectively. The number of patients growth rate should see

improvement post-2013, as we expect KPJ Klang Specialist Hospital (May 2012), Sabah

Medical Centre and Pasir Gudang Specialist (total capacity of 570 beds), to start contributing

positively after more than one and half years of operation. Management also indicated that

new hospitals usually take two to three years to break-even.

Blue-sky scenario (bull case) – RM 7.60 (21% upside)

In our bull-case scenario, instead of expecting improvement in patients‟ admissions post-

2013, we assume that the new hospitals would positively contribute within a year of operation

as KPJ Kajang (KPJ Kajang Specialist Hospital) managed to break even within its first year of

operation.

With the above in mind, we expect the total of number of patients could grow by 7.8–9.3%

from 2013 to 2015, as opposed to our base-case scenario of 7.0–7.8%. The increase in the

number of patients would translate to a revenue increase of 0.7–5.1%, which would provide

uplift to our target price of RM7.10 (18% upside). Combined with the potential increase to Al-

Aqar‟s share price, our bull-case scenario could reach as high as RM7.60 (21% upside). We

expect a 10% chance this scenario will work.

Bear-case scenario – RM5.20 (18% downside)

In our bear-case scenario, we assume that inpatient numbers drop by 3.3%, 2.9% and 2.6%

in 2013, 2014 and 2015, respectively, to reflect the drop in foreign patient numbers following

macroeconomic weakness. The fall in inpatient numbers would translate to an 8-21% drop in

revenue from FY13 to FY15. Currently, the medical tourism segment contributes around 10%

of KPJ‟s revenue.

Why not invest in Thai hospital operators?

Fig 3 KPJ trades at 22x FY13E earnings vs regional peers at 21x–30x FY13E earnings

Bbg ticker

Price Target Up/ (Down)

side Market

cap PER (x) EV/EBITDA (x) Div Yield

(%) 3-year EPS

CAGR

(lcy) (lcy) (%) Rec (US$m) FY12E FY13E FY14E FY12E FY13E FY14E FY13E (%)

Malaysia

KPJ Healthcare KPJ MK 6.27 7.10 13.2 OP 1,279 27.0 23.1 20.0 14.1 12.2 10.6 2.2 12.9

IHH Healthcare IHH MK 3.11 NR 8,045 43.2 33.1 25.7 24.1 19.9 16.6 0.1 57.8 Thailand (Jitima Ratanatam) Bangkok Dusit BGH TB 108.00 114.00 5.6 OP 5,355 29.6 24.2 19.9 18.1 15.6 13.6 1.7 23.3 Bumrungrad BH TB 81.50 69.00 -15.3 UP 1,905 31.3 29.7 24.7 22.5 19.3 16.5 2.0 21.7 Bangkok Chain BCH TB 9.55 10.00 4.7 N 611 21.9 21.1 18.5 12.6 10.9 10.2 2.8 14.5 India (Abhishek Singhal) Apollo Hospitals* APHS IN 635.15 725.00 14.1 OP 1,551 27.7 21.7 17.2 14.5 11.9 9.8 0.7 32.9 Fortis Healthcare* FORH IN 93.40 85.00 -9.0 UP 680 nmf nmf 24.5 13.0 10.7 8.8 0.0 -37.8 Opto Circuits* OPTC IN 124.40 215.00 72.8 OP 542 5.8 5.0 4.5 5.4 4.8 4.3 2.4 18.2 Simple Average 31.8 23.5 19.3 17.5 13.9 11.9 1.4 17.9 Mkt Weighted Average 35.8 24.4 19.0 17.8 14.8 12.8 1.4

Priced as of market close 5 September 2012 *APHS IN, FOTH IN and OPTC IN are based on 03/FY13 – 03/FY15

Source: Bloomberg, Macquarie Research, September 2012

Base case –RM7.10

(13% upside)

Bull case – RM7.60

(21% upside)

Bear case – RM5.20

(18% downside)

Turning around a

new hospital within

a year is possible,

as it has been done

before


10 September 2012 5

Some may ask why not invest in Thai hospital healthcare operators, which currently trade at a

premium to KPJ but have apparent better growth prospects? In our view, given the

macroeconomic uncertainty, investors may be reluctant to invest in Thai operators as 26-59%

of their revenue comes from foreign patients as opposed to KPJ where foreign patients only

account for 10%. We saw a significant fall in the number of foreign patients visiting Thai

hospitals during the peak of the global financial crisis (2007-2009).

Fig 4 SWOT analysis

Strength:

KPJ is a well-established household name in Malaysia

as it has more than 20 hospitals in the country and been

operating for over 30 years.

KPJ plans to inject its fully-operational hospitals into its

associate Al–Aqar Healthcare REIT and rent back these

assets through a lease-back agreement. This strategy will

free up cash flow for capex to help finance future

expansion.

Weaknesses:

Liquidity remains an issue as Johor Corp currently holds a

41% stake in KPJ Healthcare; this is an improvement from

JCorp‟s previous stake of 81% in 2002.

KPJ is operating close to its optimal utilization rate at

65–70%; any delay in expansion plans could affect growth

prospects.

Opportunities:

10% of KPJ‟s revenue is from the medical tourism

segment; KPJ aims to increase this to 25% by working

with the government to further promote medical tourism

aboard.

Despite having a network of 21 hospitals in Malaysia,

KPJ is not part of the 12 hospitals in Malaysia that are

approved by the Singapore government to use CPF

Medisave in Malaysia.

Threats:

As part of the „liberalisation‟ of the private healthcare sector in

Malaysia, the government has started to allow foreign equity

participation in the set-up of new hospitals. The new foreign

hospitals may be seen as a threat as they have better

branding and stronger balance sheets.

Apart from the entry of foreign competitors, Malaysia could

also have an additional 17 new private hospitals by 2015,

with licence to operate some 4,500 beds (incl. KPJ‟s new

hospitals).

Source: Macquarie Research, September 2012


10 September 2012 6

Valuation, recommendation, risks TP RM7.10 with upside of 13%, and pays quarterly dividend

We value KPJ based on sum-of-parts methodology and arrive at our target price of RM7.10

with an implied upside of 13%. 85% of the target price value is derived from KPJ‟s hospital

operation business based on DCF methodology with 8.4% WACC and 10x EV/EBITDA for

the terminal value, and we also add the value of Al-Aqar Healthcare REIT (Al-Aqar) at market

price.

KPJ‟s implied 2013 P/E at 22x is higher than its historical average P/E of 10x as it reflects:

1. Improve trading liquidity

2. 1.4x higher comparable valuation of IHH (KPJ‟s 23x FYE13 PER vs IHH‟s 33x

FY13E PER)

3. Scale of the business vs competitors

4. Favourable legislation changes that have recently been implemented

Our cash flow assumptions and sensitivity analysis are summarized below.

Fig 5 Free cash flow assumptions

Free Cash Flow (FCF) 2013E 2014E 2015E 2016E 2017E

EBITDA 313.8 361.8 413.4 472.1 543.5 + Dividend from associates (ex-Al Aqar) 7.8 8.8 10.1 11.6 13.3 - Tax -64.1 -74.0 -85.9 -100.6 -117.8 - Capex -200.0 -200.0 -200.0 -240.0 -240.0 - Change in WC -8.8 -10.1 -11.7 -14.2 -16.7

FCF 48.7 86.5 125.8 128.9 182.3

NPV of FCF @ 8.4% WACC 432 PV of terminal value 3,932 (Terminal Value of 4,977 based on 10x FY17 EBITDA)

Sum of NPV at YE 4,364

DCF valuation estimates at YE Enterprise Value 4,364 Less: Net Debt 127 Less: Minority 115 Add: Al-Aqar REIT market value ~ 49% 495 (Mark to market @ RM1.45/shr)

Equity Value 4,617 Value per share 7.10 (Assuming all outstanding warrants are converted)


We calculate KPJ‟s terminal value at 10x FY17E EBITDA (one standard deviation above the

two-year historical EV/EBITDA average), which we think better reflects the defensiveness of

the business post the implementation of the Private Healthcare Facilities and Services Act

1998, which came into effect in May 2006.

Despite forecasting EBITDA to double by 2017, we are estimating flat capex estimates at

RM200m as KPJ should continue to maintain its „asset light‟ business model and will likely

dispose the newly built hospital buildings to Al-Aqar Healthcare REIT once they are

operational.

Fig 6 Implied valuation multiples

2012E 2013E 2014E Implied valuation Current @TP Current @TP Current @TP

Implied P/ E (x) 27.0 30.2 23.1 25.8 20.0 22.3 Implied P/ BV (x) 3.8 4.5 3.5 4.1 3.2 3.7 Implied EV/ EBITDA (x) 14.1 16.3 12.2 13.9 10.6 12.1 Implied Dividend yield (%) 1.8 1.6 2.2 1.9 2.5 2.2

Source: Company data, Macquarie Research, September 2012; priced as of market close 5 September 2012


10 September 2012 7

Fig 7 Cost of equity and cost of debt assumption for WACC of 8.4%

Cost of equity Cost of debt

Risk-free rate 4.0% Pretax cost of debt 4.0% Market risk premium 6.0% Marginal tax rate 25.0% Stock Beta 0.85x Cost of equity, Ke 9.1% Net cost of debt, Kd 3.0% Weight applied 89% Weight applied 11%


Our risk-free rate estimate for WACC is based on the current 20-year Malaysia government

bond yield. There could be more upside potential to our target price as our risk-free rate

assumption at 4.0% could lower further, as the Malaysia 20-year government bond yield has

fallen from 4.07% to 3.92% since the beginning of the year.

Fig 8 DCF sensitivity analysis: WACC and terminal value EV/EBITDA multiples

Terminal EV/EBITDA DCF Value sensitivity 8.5x 9.0x 9.5x 10.0x 10.5x 11.0x 11.5x

WA

CC

(%

)

7.0% 6.50 6.80 7.10 7.40 7.70 8.00 8.40 7.5% 6.40 6.70 7.00 7.30 7.60 7.90 8.20 8.0% 6.20 6.60 6.90 7.20 7.50 7.80 8.10

8.5% 6.10 6.40 6.70 7.10 7.30 7.60 7.90

9.0% 6.00 6.30 6.60 6.90 7.20 7.50 7.80 9.5% 5.90 6.20 6.50 6.80 7.10 7.40 7.70

10.0% 5.80 6.10 6.40 6.70 7.00 7.30 7.50


Undemanding valuation (at first glance)…

Valuation seems demanding compared to its historical average, at first glance, but the higher

valuation multiples reflect the changes KPJ has experienced compared to five years ago.

Fig 9 KPJ P/E trading-band chart Fig 10 KPJ EV/EBITDA trading-band chart

Source: Bloomberg, Macquarie Research, September 2012 Source: Bloomberg, Macquarie Research, September 2012

1) Improved trading liquidity

We believe the improved liquidity in KPJ shares is due to JCorp lowering its stake in KPJ from

81% in 2002 to 41% today. With JCorp‟s ongoing debt issue, there is a possibility that JCorp

could further divest its stake by disposing the warrant it currently owns. The outstanding

warrants would increase KPJ‟s share base by 3.7%, as they are already in the money (strike

price at RM1.70) with an expiration date in January 2015.

0

5

10

15

20

25

Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

(x)

+1 Stdev

-1 Stdev

Average: 11x forward PER

+2 Stdev

-2 Stdev0

2

4

6

8

10

12

14

Jan-07 Jan-08 Jan-09 Jan-10 Jan-11 Jan-12

(x)

+2 Stdev

+1 Stdev

Average: 6.3x EV/EBITDA

-1 Stdev

-2 Stdev


10 September 2012 8

Fig 11 JCorp‟s paring down has improved KPJ‟s liquidity

Fig 12 JCorp is looking to trim down its debt

Source: Bloomberg, JCorp, Macquarie Research, September 2012 Source: Company Data, Macquarie Research, September 2012

We do not think that JCorp would look to raise its KPJ stake, despite recently getting help

from the federal government to help guarantee JCorp‟s newly issued debt, intended to

refinance its outstanding bonds worth RM3.2bn, which matured in July 2012. During the

process, JCorp sold RM700m of assets to help close the difference. With JCorp looking to

close the privatisation deal in QSR Brands (QSR MK, Not Rated) and KFC Holdings (M) (KFC

MK, Not Rated), we believe it is highly unlikely JCorp would increase its stake in KPJ.

2) Improved returns through the listing of Al-Aqar Healthcare REIT

To improve the KPJ‟s cash flow, starting from 2006 KPJ decided to operate under an „asset

light‟ business model by disposing its hospital assets to its associate Al-Aqar Healthcare

REIT. So far, KPJ has sold off 24 hospital buildings to Al-Aqar. We believe the move is

beneficial to shareholders as it unlocks the value of the building while freeing up more cash

flow to help fund KPJ new expansions.

…with room for a further re-rating

The listing of IHH (IHH MK, Not Rated) in Bursa Malaysia and the Singapore Stock

Exchange has raised investor interest in healthcare-related stocks in Malaysia (Fig 14). We

believe the reason for the increase in KPJ interest can be attributed to its similarity to IHH in

the Malaysia healthcare business, with KPJ trading at a discount to IHH. IHH is currently

valued at double the PER multiple of KPJ; although IHH is significantly larger with its

international reach, KPJ is more profitable with a better expected return on asset and equity

(Fig 13).

Fig 13 KPJ is expected to be more profitable than IHH Fig 14 Interest in KPJ picked up post listing of IHH

*IHH numbers based on Bloomberg consensus estimates

Source: Company Data, Macquarie Research, September 2012 Source: Bloomberg, Macquarie Research, September 2012

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

4.0

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

(RM mn)

0

10

20

30

40

50

60

70

80

90

(%)ADTV (LHS) JCorp stake (RHS)

0%

50%

100%

150%

200%

250%

300%

350%

400%

2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

net debt to equity ratio

0

2

4

6

8

10

12

14

16

18

FY12 FY13 FY14

ROE (%)

IHH KPJ

0.0

5.0

10.0

15.0

20.0

25.0

Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12

(RM mn)

Average 5-day value traded

is on its new high post

listing of IHH

We believe it is

highly unlikely

JCorp would

increase its KPJ

stake in the short to

mid term.


10 September 2012 9

New REIT injection (of two hospitals)? We expect KPJ to inject Pasir Gudang hospital

building and the New Sabah Medical Centre (SMC) building into Al-Aqar REIT once they are

both operational by the end of the year. KPJ could also recognise a gain from the revaluation

of these assets upon transfer/sale to Al-Aqar REIT, as it is currently being valued at cost on

its balance sheet.

An „official‟ dividend policy Currently KPJ does not have an „official‟ dividend policy, which

could potentially be a concern for yield-searching investors. An official dividend policy should

ease investor concerns on whether management will continue paying 50% of their profits

through dividends.

Based on its historical trend, we do expect KPJ to maintain a 50% payout ratio for the full

year with quarterly dividends. We have observed that companies that pay quarterly dividend

are favoured, as investors are willing to pay a premium for the certainty of payment.

Fig 15 KPJ started paying a quarterly dividend in 2010

Fig 16 KPJ has one of the highest dividend yields among peers for FY12E

DPS from 2005-2009 are adjusted to reflect bonus issue DPS for 2007-2009 incl. dividend-in-specie for Al-Aqar share

*IHH div yield is based on Bloomberg consensus estimates


Despite growing at a slower pace than its peers, KPJ is trading at sector-average multiples.

We think there is limited downside, as at 2.2%, KPJ yield is 80bps above the sector average

of 1.4%. We expect KPJ to continue paying a quarterly dividend as opposed to the industry

norm of a semi or annual dividend.

Fig 17 KPJ trades at 22x FY13 earnings with a quarterly dividend payment

Bbg ticker

Price Target Up/(Down)

side Rec Market

cap PER (x) EV/EBITDA (x) Div Yield

(%) 3-year EPS

CAGR

(lcy) (lcy) (%) (US$m) FY12E FY13E FY14E FY12E FY13E FY14E FY13E (%)

Malaysia

KPJ Healthcare KPJ MK 6.27 7.10 13.2 OP 1,279 27.0 23.1 20.0 14.1 12.2 10.6 2.2 12.9

IHH Healthcare IHH MK 3.11 NR 8,045 43.2 33.1 25.7 24.1 19.9 16.6 0.1 57.8 Thailand (Jitima Ratanatam) Bangkok Dusit BGH TB 108.00 114.00 5.6 OP 5,355 29.6 24.2 19.9 18.1 15.6 13.6 1.7 23.3 Bumrungrad BH TB 81.50 69.00 -15.3 UP 1,905 31.3 29.7 24.7 22.5 19.3 16.5 2.0 21.7 Bangkok Chain BCH TB 9.55 10.00 4.7 N 611 21.9 21.1 18.5 12.6 10.9 10.2 2.8 14.5

India (Abhishek Singhal) Apollo Hospitals* APHS IN 635.15 725.00 14.1 OP 1,551 27.7 21.7 17.2 14.5 11.9 9.8 0.7 32.9 Fortis Healthcare* FORH IN 93.40 85.00 -9.0 UP 680 nmf nmf 24.5 13.0 10.7 8.8 0.0 -37.8 Opto Circuits* OPTC IN 124.40 215.00 72.8 OP 542 5.8 5.0 4.5 5.4 4.8 4.3 2.4 18.2 Simple Average 31.8 23.5 19.3 17.5 13.9 11.9 1.4 17.9 Mkt Weighted Average 35.8 24.4 19.0 17.8 14.8 12.8 1.4

Priced as of market close 5 September 2012 *APHS IN, FOTH IN and OPTC IN are based on 03/FY13 – 03/FY15

Source: Bloomberg, Macquarie Research, September 2012. Price as of 5 September 2012

0.0

10.0

20.0

30.0

40.0

50.0

60.0

2005 2006 2007 2008 2009 2010 2011 2012

DPS (sen/shr)

4Q

3Q

2Q

1Q

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Bangkok

Chain

Opto

Circuits

KPJ BH Bangkok

Dusit

Apollo *IHH Fortis

Div Yield (%)

We are assuming

KPJ will maintain a

50% payout ratio

moving forward

KPJ’s div yield at

2.2% is 80bps above

industry average

KPJ has made an

offer to acquire the

remaining 49%

stake in SMC


10 September 2012 10

Why not invest in Thai hospital operators?

The biggest difference between Thai operators and KPJ is their reliance on international

patients (medical tourism patients). Based on the latest annual numbers, revenue contribution

from international patients for Thai operators is between 26-59%, compared to 10% for KPJ.

We think given the uncertainty looming in the macro environment, investors may prefer

investing in KPJ as its revenue is relatively stable compared to Thai operators.

Fig 18 KPJ‟s foreign-patient revenue is less than its Thai peers

Fig 19 Bumrungrad Hospital (BH TB) saw an 8% drop in international patients admissions during the GFC

Based on 2011 numbers

Source: Company Data, Macquarie Research, September 2012 Source: Company Data, Macquarie Research, September 2012

Comparing us to consensus

Fig 20 Our estimates are slightly above the street but we still think they are undervaluing KPJ shares

Net profit (RM mn) EBITDA (RM mn) Depreciation (RM mn) Target price

FY12 FY13 FY14 FY12 FY13 FY14 FY12 FY13 FY14 (RM)

Macquarie 153.0 178.9 206.8 267.7 313.8 361.8 88.4 103.8 117.0 7.10

Consensus 151.2 173.8 205.0 284.6 322.6 371.0 81.6 86.9 99.4 6.46


Despite having slightly higher net profit FY12-FY14 (1-3%) estimates compared to the Street,

our EBITDA estimates are 6-8% below consensus. We think this is because the company will

receive a bigger contribution from its associate and lower interest expenses in future years.

The street may be underestimating the value of KPJ, as we believe it is no longer the

company it was several years ago – we have seen KPJ‟s liquidity significantly improve with a

steady quarterly policy.

Risks to our investment thesis

Risks to our target price and earnings forecasts come in the form of external and internal

financial market “shocks” or issues affecting our assumptions, such as:

Timing of new hospital openings. Our estimates are based on the hospital expansion

plan timeline provided by KPJ management.

Execution risk of overseas expansion. KPJ is still keen to expand overseas despite

hitting roadblocks in Dhaka and Bangladesh. There are execution risks in venturing aboard

from operation, valuation (i.e., over-paying) to regulatory risks.

Recruiting the right medical professionals. KPJ‟s success lies in its ability to attract the

right medical professionals. KPJ‟s inroads in smaller cities are making it tougher to

retain/attract specialists in smaller cities as most specialists prefer working in bigger cities.

90

74

41

10

26

59

0

10

20

30

40

50

60

70

80

90

100

KPJ Bangkok Dusit Bumrungrad

(%)

Domestic International

0

50,000

100,000

150,000

200,000

250,000

300,000

350,000

400,000

450,000

500,000

2004 2005 2006 2007 2008 2009 2010 2011

# of patients



Legislative changes. There is a possible change to the current two-tier healthcare system

such as the 1Care for 1Malaysia plan with the possibility of introducing a British-like

National Health Service (NHS) system in the next two to three years. The implementation

of a new healthcare system could change the risk profile of the stock.

Ability to sell its assets to Al-Aqar REIT. The ability to sell its assets to Al-Aqar REIT is

a key funding source for KPJ, as it enables them to continue their acquisition trail without

further leveraging their balance sheet.

Ability to continue paying dividends. There is a risk that management may deviate from

its current informal system, including lowering the payout ratio or the frequency of the

dividend payments, as the current KPJ management does not have an official dividend

policy.



Benefiting from the public to private switch KPJ benefiting from “the system”

KPJ, with the widest hospital network in Malaysia, is poised to benefit from patients opting for

private hospital care instead of cheaper-but-congested public hospitals. If the government‟s

focus remains on paying off medical bills and not building-up more hospitals, the congested

public hospital scene is expected to continue.

Fig 21 KPJ has one of the most extensive hospital networks in Malaysia

Source: Company Data, Macquarie Research, September 2012

“The system”: patients switching to private hospitals

Malaysia has a two-tier healthcare system consisting of a government-run universal healthcare

system and a private healthcare system. Under the two-tier system, all Malaysians are able to

seek medical treatment at a minimal fee (outpatient medical treatment is RM2 per visit).



Fig 22 More money is spent on private healthcare Fig 23 … but not from the government

Source: World Databank, Macquarie Research, September 2012 Source: MOH, Macquarie Research, September 2012

Despite having a similar annual budget allocation for the healthcare sector, the recent focus

has been on operating expenditures instead of investing in new hospitals. The Malaysian

government has only allocated 2.5% of GDP towards public healthcare, which is less than the

5-6% of GDP recommended by WHO.

Fig 24 Government needs to start spending on healthcare capex, in our view

Fig 25 … as only five government hospitals were build over the last five years

Source: MOH, Macquarie Research, September 2012 Source: MOH, Macquarie Research, September 2012

More than 60% of the funding through opex is used for medical care payments, while 41% of

capex is used for either building or expanding hospitals. If we were to compare the absolute

amount being spent on new hospital and facilities, it has drop by 35% from RM2.2bn in 2003

to RM1.45bn in 2010.

With fewer hospitals being built, more patients have opted to seek treatment in private

hospitals. We expect this situation to worsen as government has significantly cut its spending

on building new hospitals. Malaysia‟s bed per population is low compared to other countries.

1.0

1.2

1.4

1.6

1.8

2.0

2.2

2.4

2.6

2.8

2001 2002 2003 2004 2005 2006 2007 2008 2009

(% of GDP)

Pirvate healthcare expenditure Public healthcare expenditure

0

2

4

6

8

10

12

14

16

18

2003 2004 2005 2006 2007 2008 2009 2010 2011

(RM'bn)

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

(%)Health Budget (LHS)

% of Health Budget Allocation to National Budget (RHS)

0

2

4

6

8

10

12

14

16

2003 2004 2005 2006 2007 2008 2009 2010 2011

(bn)

Opex (RM 'bn) Capex (RM 'bn)

120

125

130

135

140

145

150

2003 2004 2005 2006 2007 2008 2009 2010 2011

34

35

36

37

38

39

40

41

42

43('000)

public hospital (LHS) no. of beds (RHS)



Fig 26 Beds per 10,000 population across the region

Fig 27 … as the government has significantly cut spending on new hospitals

Source: WHO, Macquarie Research, September 2012 Source: MOH, Macquarie Research, September 2012

Given life expectancy expansion and the increasing acceptance of medical, demand for

private healthcare is expected to continue growing. However, for those who can‟t afford

private care, government aid is the only option. The problem is, without the government

stepping up their investment in public healthcare the system will be stretched even further.

Malaysia‟s ageing population (15% of people aged above or expected to reach the age of 60

by 2035) could also provide further opportunity for KPJ to enter into elderly-care services.

KPJ is transferring the knowledge from its elderly-care operations at its recently acquired Jeta

Gardens in Australia, which specialises in this field.

Fig 28 Medical premium contribution is on the rise, supporting affordability

Fig 29 Malaysia‟s population is aging

Source: BNM, Macquarie Research, September 2012 Source: MOH, Macquarie Research, September 2012

We believe there is still room for growth in the private healthcare sector, as only 25% of

Malaysian hospital beds are currently operated by private operators. KPJ is the market leader

in the private healthcare segment with 19% market share, followed by IHH (ParkwayPantai)

with 14% market share.

0

20

40

60

80

100

120

140

160

Japa

n

Kor

ea

China

Singa

pore

Vietn

am

Unite

d Sta

tes

Bru

nei

Thaila

nd

Malay

sia

Indo

nesia

Philip

ines

# of bed

0.0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1.6

1.8

2003 2004 2005 2006 2007 2008 2009 2010

(RM 'bn)

Total spending on new hospitals

0

100

200

300

400

500

600

700

800

900

2005 2006 2007 2008 2009 2010 2011

0%

5%

10%

15%

20%

25%

30%RM'mn (RHS) growth (LHS)

23

24

25

26

27

28

29

30

2003 2004 2005 2006 2007 2008 2009 2010 2011

('mn)

4.0

4.2

4.4

4.6

4.8

5.0

5.2

5.4

(%)

Population (LHS) >65 years old (RHS)



Fig 30 Private beds account for only 25% of total beds available

Fig 31 KPJ is Malaysia‟s leading private healthcare provider

Source: MOH, Macquarie Research, September 2012 Source: MOH, Company Data, Macquarie Research, September 2012

38,625 40,057 41,249 41,580 41,483 41,716

11,637 11,29111,689 12,216 13,186 13,568

0

10,000

20,000

30,000

40,000

50,000

60,000

2006 2007 2008 2009 2010 2011

# of beds

Public Private

KPJ

19%

IHH

14%

Others

67%



Growing edge in a captive market KPJ is not only benefiting from the change in patients‟ preference, but also, from the Private

Healthcare Facilities and Services Act 1998. Under the Act, the expansion and building of new

hospitals are required to adhere to zoning requirements (with the exception of specialist

hospitals), which limits the total hospital bed to population ratio within a 14km radius to 1: 500.

Existing players like KPJ benefited from the Act as it served as a barrier to entry. In addition,

it appears, with the help of it Al-Aqar REIT, KPJ is able to acquire smaller hospitals around

the country while simultaneously denying its competitors market access.

KPJ: The only Malaysia hospital operator with a REIT

Given the Act was effective from May 2006, the availability of suitable locations for new

hospitals are limited due to zoning constraints. To maintain KPJ‟s growth while strengthening

its portfolio as the leading Malaysian private hospital operator, KPJ has been actively looking

to acquire smaller hospitals (<90 beds) around Malaysia. On average, over the past five

years, KPJ has acquired two hospitals per annum and we expect its acquisition momentum to

continue.

Lowering investment cost through Al-Aqar REIT

We believe that KPJ has an edge over its peers in penetrating new markets, as KPJ has the

ability to acquire smaller hospitals to gain access while being protected against other

competitors with the help of Al-Aqar REIT.

Although the allocation of RM100-250m for hospital acquisitions seems small, the cash

outflow for these acquisitions is usually lower. Upon completion of the acquisitions, KPJ then

disposes the hospital asset to its REIT and in return KPJ is compensated with cash and units

in the REIT, while maintaining control over the hospital operation. By doing so, KPJ is able to

recoup part of its investment upfront, and potentially reward its shareholders by distributing

the accumulated REIT units.

Fig 32 Preferable acquisition structure of KPJ


We believe that the advantage cannot be easily mimicked by its peers, as it requires a

reasonable size of building assets to set up a REIT. The only competitor that could possibly

follow suit would be Parkway Pantai (PPL) which has 11 hospitals with 2,010 beds in

Malaysia, as it recently decided to sell it Gleneagles Medical Centre, Malaysia to its parent

company associate Parkway Life REIT (PREIT SP, Not Rated). With the backing of the REIT,

KPJ should be able to continue with its acquisitions and could possible outbid its competitors

if needed.

The REIT enables

KPJ to lower its

investment cost

while maintaining

control of the asset

Hospital operators

like KPJ are the

main beneficiaries

of the Private

Healthcare Facilities

and Services Act

1998

KPJ has been

acquiring two

hospitals per year

for the past five

years



Do these acquisitions make sense?

The zoning requirement acts as a barrier to entry against new private hospitals, while forming

a captive market for private hospitals within a 14km radius. Without new competition entering

the market, we believe the key question to ask is whether these acquisitions make sense.

Fig 33 Recent acquisition detail (2006-2012)

Est Valuation

Acquired Hospital Bed Count Date Stake Acq. Value PER (x) P/BV (x)

Damai Specialist Centre 48 16-Jan-06 97% 16.9 85.0 2.6 KPJ Selangor Specialist Hospital 172 10-Feb-06 60% 80.0 36.1 3.7 Sentosa Medical Centre 212 11-Dec-06 100% 72.0 18.2 1.5 Taiping Medical Centre 48 2-Jan-08 100% 18.0 10.3 1.7 Kluang Utama Specialist Hospital 50 31-Dec-08 100% 12.0 8.6 1.4 KPJ Seremban Specialist Hospital 130 5-Aug-09 100% 50.0 7.4 1.4 Sabah Medical Centre 150 25-Jun-10 51% 51.0 NA 0.7 Sibu Specialist Medical Centre 35 6-Apr-11 100% 28.1 78.6 2.9 Jeta Gardens 108 30-Nov-11 51% 19.0 NA 0.5 RS Medika Permata Hijau 7-May-12 80% 19.8 2.3 0.9 Average (Malaysia acq. only) 34.9 2.0 Average (Global) 30.8 1.7


Some of the recent acquisitions were done at a hefty valuation, which was due to its strategic

location purposes. For example, the Damai Specialist Centre was acquired at 85x PER, but

provided KPJ with a foothold into the Kota Kinabalu (capital of Sabah state) market which

only has three private hospitals and also limits more established competitors from entering

the market.

Excluding strategic investments, the valuation for these assets looks reasonable at 14x PER.

But it is hard to quantify the synergy arising from these acquisitions, as we are unable to

break down the increase in revenues which are due to the new referral business. We view

management‟s ability to take advantage of the valuation differences between KPJ assets and

the acquired assets as a plus.

Fig 34 Sentosa Medical Centre recent revenue growth trends


Overall some investors might not be comfortable with these acquisitions, but we believe that

management has the execution ability to at least maintain the growth rate of these newly

acquired assets. As scarcity of new hospital land increases, acquisitions will likely be the key

to KPJ‟s future.

2%3%

3% 4%

5%

0%

10%

0

10

20

30

40

50

60

70

2003 2004 2005 2006 2007 2008 2009 2010

(mn)

-2%

0%

2%

4%

6%

8%

10%

12%

Revenue (LHS) Growth (RHS)

Post acqusition

It is hard to quantify

the new referral

business arising

from these

acquisitions



Organic growth insufficient

Of KPJ hospitals, 71% are established hospitals with more than 10 years of operation. These

hospitals provide relatively stable income but lack strong growth momentum given their

mature client base. To improve the return on these mature hospitals, KPJ is investing in new

equipment to offer new services at a competitive rate to their current patients.

While building a new hospital can extract a higher return, the availability of suitable locations

remains a key concern. To tackle this problem, KPJ seeks to acquire partially built hospitals

or partner with township developers to build a new hospital within a new township.

Fig 35 Strong growth momentum

New # of Beds Est. Completion Eff. Stake

Sabah Medical Centre 250 2012 100% Pasir Gudang Specialist Hospital 120 2012 100% Muar Specialist Hospital 120 2013 100% Bandar Dato Onn, JB 400 2014 100% Pahang Specialist Hospital 200 2014 70% Perlis Specialist Hospital 90 2014 60%


Based on KPJ management experience, new hospital within a city area would likely take at

least one to three years before it is able to break even. Despite higher returns on the

greenfield projects, management is inclined to grow through M&A as it provides them with a

steady client base and doctors. KPJ aims to increase its hospital count to 30 from 22 by 2015.

Is the doctor shortage a problem to KPJ‟s growth strategy?

With recent news articles pointing out that Malaysia currently lacks many specialist doctors,

we think KPJ is somewhat shielded from the problem. The key for the hospital growth lies in

its ability to attract and retain doctors. In the KPJ hospital network, doctors/specialists rent a

clinic to practise while KPJ maintains the hospital facilities. With the specialist taking home

most of the consultation fee (KPJ takes 5-7% of it as a management fee), they are more likely

to stay with KPJ as they are not employed by KPJ and are free to refer their patients to any

facilities for further treatment.

KPJ need not to worry about doctors over-charging patients and in turn damaging its

reputation, as all medical procedure and consultation fees have a price ceiling which is

regulated by the government.

While getting the right doctors to serve in smaller city hospitals is a challenge, acquiring

existing hospitals would come with existing specialists & staff. KPJ would then bring in new

equipment that was no longer being used in their bigger hospitals to diversify its service

offering in the newly acquired hospital.

Organic growth can

be obtained by

either investing in

new equipment or

building new

hospitals

Specialists partner

with KPJ (not

employees)

The Act limits the

fee a doctor can

charge to his patient

KPJ aims to

increase its hospital

count to 30 from 22

by 2015



Unsuspected derivative play on interest rate Emil Wolter, our Asia strategist believe that investors should stay focused on the return of

capital, hence investors should be looking into yield stocks with growth (link). If yield is all that

matters, we believe Al-Aqar Healthcare REIT (Al-Aqar) could trade up to RM2.02 (which

would add an additional 5% to our target price) on the assumption that investors bid up to

sovereign yield. Based on Al-Aqar‟s current market value, it constitutes c.10% of our target

market value.

Fig 36 If yield is all that matters, moves in Al-Aqar‟s stock price could have a positive impact on our target price

Sovereign Debt Yield

Spread to Sovereign 3.00% 3.25% 3.50% 3.75% 4.00% 4.25% 4.50%

0.00% 7.56 7.46 7.38 7.31 7.25 7.20 7.15 0.25% 7.46 7.38 7.31 7.25 7.20 7.15 7.11 0.50% 7.38 7.31 7.25 7.20 7.15 7.11 7.07

0.75% 7.31 7.25 7.20 7.15 7.11 7.07 7.04

1.00% 7.25 7.20 7.15 7.11 7.07 7.04 7.00 1.25% 7.20 7.15 7.11 7.07 7.04 7.00 6.98

Calculation are formulated based on FY11 net distribution


Assuming a more realistic assumption at a 75bps spread to sovereign debt, there would still

be an additional 2% (RM0.11) upside to our current target price. In Malaysia, we have seen

some yield compression from high-yield consumer names and the telco sector. We believe

that the same yield compression scenario could also positively impact Al-Aqar‟s stock price

as it has a similarly stable defensive cash flow.

Fig 37 Telco yield is on the move Fig 38 … same for the consumer sector


5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

Nov-09 May-10 Nov-10 May-11 Nov-11 May-12

Div Yield

5.8%

4.0%

4.5%

5.0%

5.5%

6.0%

6.5%

7.0%

7.5%

Jan-09 Jul-09 Jan-10 Jul-10 Jan-11 Jul-11 Jan-12 Jul-12

div yield

4.8%

Al-Aqar has the

potential to add 5%

to our target price

We have seen yield

compression across

high-yield consumer

names and the telco

sector.

https://www.macquarieresearch.com/rp/d/r/publication.do?pub_id=7176623&file_name=e121446.html&



Malaysia Healthcare and its future Malaysia private healthcare services are regulated by the Private Healthcare Facilities and

Services Act 1998, which became effective in May 2006. The Act covers issues from zoning

requirements to the fees that a doctor can charge for their consultation. In this segment, we

will examine how the Act has changed the landscape of the business and the impact of the

new government policies (ETP & 1Care for 1Malaysia)

Zoning requirement for new private hospitals

The Private Healthcare Facilities and Services Act 1998 regulates the private healthcare and

hospital business in Malaysia. Under the Act, the expansion and the setting up of new

hospital are required to adhere to zoning requirements (with the exception of specialist

hospital), which limits the total hospital bed to population ratio within a 14km radius at 1:500.

Fig 39 Bed to population ratio in various states and federal territories

Source: MOH, Macquarie Research, September 2012

It is highly unlikely for any new hospitals to be approved in Kuala Lumpur and Pulau Pinang

as their bed to population ratio is above the zoning requirement and there aren‟t many new

township development projects that are 20km distance away from an existing hospital.

Where to build?

Affluent states

Preferably private hospital operators would want to set up at locations where the surrounding

population is affluent. 67% of the total current private hospital beds are located in the top 4

richest states in Malaysia (KL, Pulau Pinang, Sarawak & Selangor) while Kuala Lumpur alone

has 23% of the total capacity.

244 260330 350

519553 570 592 595

699 708 724 738797

844

417

0

100

200

300

400

500

600

700

800

900

Kuala

Lum

pur

Putr

aja

ya

Pula

u

Pin

ang

Pera

k

Me

laka

Negeri

Sem

bila

n

Johor

Perlis

Sela

ngor

Sara

wak

Kedah

Pahang

Sabah

Te

rengganu

Labuan

Kela

nta

n

Two federal territory

and three states are

below the

suggested zoning

requirement

New hospitals can

only be built 20km

away from the

nearest hospital



Fig 40 67% of private hospital beds are located in the top 4 richest state

Source: Department of Statistic 2010, MOH, Macquarie Research, September 2012

Within the 4 states mentioned, we don‟t think any private operators will be able to set up new

hospitals in Kuala Lumpur and Pulau Pinang due to the zoning requirements. The only

possibility to increase market leadership in these 2 states would be either through acquisition.

Based on the Associate of Private Hospital of Malaysia (APHM) member list, the number of

privately owned and managed hospital in Kuala Lumpur is 26 and Pulau Pinang is 14.

States with sizable population

By 2020, the Malaysia government hopes to raise the GNI (gross national income) per capita

to RM48,000. If the plan succeeds, affordability for private healthcare system should improve.

We expect more private healthcare groups to take advantage of it by setting up more

hospitals in the greater Klang Valley (KV) in Selangor and Kuala Lumpur and Iskandar

Development Region (IDR) in Southern Johor.

Fig 41 Bigger population = bigger opportunity for private hospital operators

Source: Department of Statistic 2010, Macquarie Research, September 2012

Pantai Parkway, KPJ and Thomson Medical Centre each has a hospital opening within the

next 3 years in either KV or IDR to take advantage of the rising population in those area.

0

10,000

20,000

30,000

40,000

50,000

60,000

Kuala

Lum

pur

Pula

u

Pin

ang

Sara

wak

Sela

ngor

Labuan

Negeri

Sem

bila

n

Me

laka

Pahang

Johor

Te

rengganu

Sabah

Pera

k

Perlis

Kedah

Kela

nta

n

(RM)

0

500

1,000

1,500

2,000

2,500

3,000

3,500# of beds

GDP Hospital

0

1,000

2,000

3,000

4,000

5,000

6,000

Sela

ngor

Johor

Sabah

Sara

wak

Pera

k

Kedah

Kuala

Lum

pur

Pula

u

Pin

ang

Kela

nta

n

Pahang

Te

rengganu

Negeri

Sem

bila

n

Me

laka

Perlis

Putr

aja

ya

Labuan

('000)

0

10

20

30

40

50

60

70Population (LHS) # of hospitals (RHS)

Acquisition or

expansion of old

hospital seems to

be the only viable

way to enter KL and

Pulau Pinang

Major hospital

players will have

new hospital

operating in KV or

IDR within the next 3

years



JV with township developers

To obtain a strategic located land at a reasonable pricing, private hospital owners will have to

work with township developers to jointly develop hospitals land. The developers will help

secure the land within its newly develop township, while hospital operators will be in charge of

building and operating the hospital. The partnership resulted in lower initial capital investment

by hospital operators, but might be problematic for independent hospital operator as they

might not have full control planning the hospital future development.

Developers might also opt to own the hospital and outsource the operation of the hospital

through hospital management agreements (HMA). Sunway Medical Center (link to Sunway

Group) and Sime Darby Healthcare (link to Sime Darby) are some of the successful hospital

own by township developers. HMAs might be another growth option for independent hospital

operators as its getting harder for them to secure land for new hospitals.

ETP: Medical Tourism is a long-term project

To transform Malaysia into a high-income economy by 2020, Malaysia Prime Minister Najib

Razak unveiled the Economic Transformation Programme (ETP) which focuses on 12

National Key Economic Areas (NKEA). Under the private healthcare NKEA, the government

identified medical tourism as one of the potential growth segments. We agree with the

government that there is considerable market potential in the medical tourism segment, but

we believe it has a long way to go before Malaysia is able to monetise it.

Fig 42 Malaysia medical tourism market in small compare to its regional peer

*Singapore is based on 2010 numbers, Thailand is based on 2009 numbers

Source: IHH‟s prospectus, Macquarie Research, September 2012

We believe that Malaysia‟s hospitals are less competitive in this segment due to:

Accreditation

Branding

Accreditation

The main consideration for most patients when they are seeking treatment abroad is better

affordability without compromising on quality and care standards. Despite having a similar

pricing structure with Thailand, Malaysia hospitals are not competitive in attracting medical

tourists. We believe this is due to the lack of accredited hospitals and branding.

170

628

1,145

0

200

400

600

800

1,000

1,200

1,400

Malaysia Singapore Thailand

(US$ mn)

Township

developers might

opt to own the

hospital instead of

partnering with

hospital operators



Fig 43 The cost of common medical procedure is similar in Malaysia and Thailand

Hearth Bypass (CABG x 4) US $ Knee Replacement US $

Malaysia 18,500 Malaysia 11,000 Thailand 22,500 Thailand 10,500 Singapore 32,500 Singapore 17,500 US 144,317 US 65,918

Source: Companion Global Healthcare Inc, Macquarie Research, September 2012

As of June 2012, there are only 6 Joint Commission International (JCI) accredited hospitals in

Malaysia, while there are 18 and 13 JCI accredited hospitals in Thailand and Singapore,

respectively.

Fig 44 Malaysia still need to build/upgrade more hospitals that adhere to the JCI standard

Source: Joint Commission International (JCI), Macquarie Research, September 2012

JCI is the gold standard for healthcare quality and patient safety, and is the basic requirement

to be part of provider network for US-based health insurance. To help monetise the

government effort in promoting medical tourism, KPJ will likely look to increase the number of

JCI accredited hospitals from its current one hospital.

Branding

The setting up of the Malaysia Healthcare Travel Council (MHTC) as a one-stop info centre

for patients is a crucial step, as more marketing activities are needed to expose foreigners to

the possibility of seeking treatment in Malaysia. The medical tourism industry in Thailand did

an exemplary job of promoting itself through a segment on CBS: 60 minutes, a popular US

TV show.

To better cater to the medical tourism market, Thai hospitals like Bumrungrad International

Hospital have remodeled their lobby after a hotel lobby to better reflect their image as a

medical tourism hospital as opposed to a traditional hospital. For KPJ to be successful in this

segment, it would have to come up with a differentiation strategy aside from just compete in

pricing.

Singapore medisave, 1 conquer more to go

To improve the medical affordability in Singapore, Singapore government have allowed

patients to use Medisave (CPF) to pay for private care in 12 Malaysia hospitals. Before opting

for Malaysia hospitals, patients are required to be referred by the groups‟ Singapore centre

first. Cheaper medical cost in Malaysia is benefiting patients seeking treatment in Malaysia

as opposed to Singapore. The announcement is an early victory for the Malaysia medical

tourism segment, but more work is still needed to be done to attract patients from other

countries. In 2008, Singapore spent about S$10.2 bn on healthcare.

18

13

65

4

0

2

4

6

8

10

12

14

16

18

20

Thailand Singapore Malaysia Indonesia Philippines

# of JCI accredited hospitals



Fig 45 Singapore‟s Medisave-approved Malaysian healthcare services providers

Hospital Group Referral centre Facilities in Malaysia

Health Management International Balestier Clinic and Health Screening Centre Regency Specialist Hospital (Johor Baru) Mahkota Medical Centre (Malacca) Parkway Holdings East Shore Hospital Gleneagles Intan Medical Centre, Kuala Lumpur Pantai Hospital, Kuala Lumpur Pantai Hospital, Cheras Pantai Hospital, Ampang Pantai Hospital, Klang Pantai Hospital, Ipoh Pantai Hospital, Ayer Keroh Pantai Hospital, Penang Pantai Hospital, Batu Pahat Pantai Hospital, Sungai Petani


Despite owning the largest hospital network in Malaysia, KPJ did not qualify to be part of the

panel of approved hospitals as they do not have a partner in Singapore, which is the rule

imposed by Medisave. We think it is important for KPJ to be part of the panel as it would help

to build a track record as a preferred medical tourism hospital.

Overall more effort and work still needs to be done by the Malaysian hospitals and KPJ if they

wish to break into the lucrative medical tourism segment.

Game changer: 1Care for 1 Malaysia?

According to multiple local media reports, the government is in the midst of introducing a new

healthcare system (1Care for 1Malaysia) to replace the current two-tier healthcare system.

We think the risk to our current forecast is low as the proposal is only at the conceptual stage

and is only expected to be brought to the table in 2014, but it could have material impact if it

becomes law.

1Care for 1Malaysia

The objective of the 1Care for 1 Malaysia (1Care) plan is to solve the overworked public

healthcare system, as most funding is going through the private healthcare system while bulk

of admissions are being handled by the public system. With the new 1Care system, patients

will have access to participating private hospitals through their local referral.

10% levy on salaries is needed. Based on the articles, Malaysian citizens would have to

contribute 10% of their salary into 1Care to finance the scheme. We think that most

Malaysians would object to such a contribution as under the current setting they are able to

dictate their own contribution toward medical insurance as they deem fit. Without a say in

physician choice, middle class Malaysians would likely not agree to the increase in

contribution.

The cost may go higher. The 1Care system does not cover all medical procedures and

medicines, and Malaysians might incur out-of-pocket expenses.

Objection from private healthcare providers. The impact to private healthcare service

providers might be severe as patients have less flexibility in picking their physicians, and

are forced to seek treatment at the assigned facilities. We believe with the additional risks

involved, private providers are also likely to object to such plan.

1Care for 1Malaysia

is only at the

conceptual stage,

but has faced strong

resistance from

Malaysian citizens



KPJ Healthcare (KPJ MK, Outperform, Target Price: RM7.10) Interim Results 1H/12A 2H/12E 1H/13E 2H/13E Profit & Loss 2011A 2012E 2013E 2014E

Revenue m 1,055 1,014 1,113 1,201 Revenue m 1,909 2,069 2,314 2,599 Gross Profit m 315 331 349 385 Gross Profit m 602 647 734 835 Cost of Goods Sold m 740 683 764 816 Cost of Goods Sold m 1,307 1,422 1,580 1,764 EBITDA m 131 136 157 157 EBITDA m 229 268 314 362 Depreciation m 37 52 50 54 Depreciation m 70 88 104 117 Amortisation of Goodwill m 0 0 0 0 Amortisation of Goodwill m 0 0 0 0 Other Amortisation m 0 0 0 0 Other Amortisation m 0 0 0 0 EBIT m 94 85 107 103 EBIT m 159 179 210 245

Net Interest Income m -8 8 -1 2 Net Interest Income m -9 -1 2 2 Associates m 17 24 16 28 Associates m 55 40 44 49 Exceptionals m 0 0 0 0 Exceptionals m 0 0 0 0 Forex Gains / Losses m 0 0 0 0 Forex Gains / Losses m 0 0 0 0 Other Pre-Tax Income m 0 0 0 0 Other Pre-Tax Income m 0 0 0 0 Pre-Tax Profit m 103 116 123 134 Pre-Tax Profit m 205 219 256 296 Tax Expense m -25 -29 -33 -31 Tax Expense m -50 -55 -64 -74 Net Profit m 77 87 90 103 Net Profit m 154 164 192 222 Minority Interests m -9 -2 -11 -3 Minority Interests m -11 -11 -13 -15

Reported Earnings m 68 85 79 100 Reported Earnings m 144 153 179 207 Adjusted Earnings m 68 85 79 100 Adjusted Earnings m 144 153 179 207

EPS (rep) sen 10.3 12.9 12.0 15.2 EPS (rep) sen 26.3 23.2 27.1 31.4 EPS (adj) sen 10.3 12.9 12.0 15.2 EPS (adj) sen 26.3 23.2 27.1 31.4 EPS Growth yoy (adj) % -2.2 -18.3 15.9 17.8 EPS Growth (adj) % 16.5 -11.8 16.9 15.6

PE (rep) x 23.8 27.0 23.1 20.0 PE (adj) x 23.8 27.0 23.1 20.0

EBITDA Margin % 12.4 13.5 14.1 13.1 Total DPS sen 12.0 11.6 13.6 15.7 EBIT Margin % 8.9 8.4 9.6 8.6 Total Div Yield % 1.9 1.8 2.2 2.5 Earnings Split % 44.5 55.5 44.1 55.9 Weighted Average Shares m 546 660 660 660 Revenue Growth % 16.1 1.4 5.5 18.5 Period End Shares m 546 660 660 660 EBIT Growth % 12.4 12.9 13.1 21.6

Profit and Loss Ratios 2011A 2012E 2013E 2014E Cashflow Analysis 2011A 2012E 2013E 2014E

Revenue Growth % 15.4 8.4 11.9 12.3 EBITDA m 229 268 314 362 EBITDA Growth % 12.5 17.0 17.2 15.3 Tax Paid m -50 -55 -64 -74 EBIT Growth % 10.5 12.6 17.1 16.6 Chgs in Working Cap m 15 -41 -9 -10 Gross Profit Margin % 31.5 31.3 31.7 32.1 Net Interest Paid m -30 -26 -26 -26 EBITDA Margin % 12.0 12.9 13.6 13.9 Other m 99 67 95 103 EBIT Margin % 8.3 8.7 9.1 9.4 Operating Cashflow m 263 213 310 355 Net Profit Margin % 8.1 7.9 8.3 8.5 Acquisitions m 79 0 0 0 Payout Ratio % 45.6 50.0 50.0 50.0 Capex m -140 -200 -200 -200 EV/EBITDA x 12.9 14.1 12.2 10.6 Asset Sales m 0 0 0 0 EV/EBIT x 17.0 19.8 17.1 14.8 Other m -159 0 0 0

Investing Cashflow m -219 -200 -200 -200 Balance Sheet Ratios Dividend (Ordinary) m -63 -76 -89 -103 ROE % 17.3 15.4 15.7 16.7 Equity Raised m 32 127 0 0 ROA % 8.7 8.8 9.6 10.4 Debt Movements m 43 -37 -17 -8 ROIC % 11.3 11.3 11.8 12.9 Other m 0 0 0 0 Net Debt/Equity % 19.1 10.5 8.1 3.8 Financing Cashflow m 11 13 -106 -112 Interest Cover x 16.9 256.1 nmf nmf Price/Book x 3.8 3.8 3.5 3.2 Net Chg in Cash/Debt m 55 26 4 43

Book Value per Share 1.6 1.7 1.8 2.0 Free Cashflow m 123 13 110 155

Balance Sheet 2011A 2012E 2013E 2014E Cash m 252 278 282 325 Receivables m 305 325 363 408 Inventories m 47 44 49 55 Investments m 94 94 94 94 Fixed Assets m 668 780 876 959 Intangibles m 168 168 168 168 Other Assets m 425 425 425 425 Total Assets m 1,959 2,115 2,258 2,434

Payables m 335 312 346 387 Short Term Debt m 140 121 113 107 Long Term Debt m 302 284 276 273 Provisions m 0 0 0 0 Other Liabilities m 185 186 209 235 Total Liabilities m 962 903 944 1,001 Shareholders' Funds m 893 1,096 1,186 1,289 Minority Interests m 104 115 128 144 Other m 0 0 0 0 Total S/H Equity m 997 1,211 1,314 1,433

Total Liab & S/H Funds m 1,959 2,115 2,258 2,434

All figures in MYR unless noted. Source: Company data, Macquarie Research, September 2012



Important disclosures:

Recommendation definitions

Macquarie - Australia/New Zealand Outperform – return >3% in excess of benchmark return Neutral – return within 3% of benchmark return Underperform – return >3% below benchmark return Benchmark return is determined by long term nominal GDP growth plus 12 month forward market dividend yield

Macquarie – Asia/Europe Outperform – expected return >+10% Neutral – expected return from -10% to +10% Underperform – expected return <-10%

Macquarie First South - South Africa Outperform – expected return >+10% Neutral – expected return from -10% to +10% Underperform – expected return <-10%

Macquarie - Canada

Outperform – return >5% in excess of benchmark return Neutral – return within 5% of benchmark return Underperform – return >5% below benchmark return

Macquarie - USA Outperform (Buy) – return >5% in excess of Russell 3000 index return Neutral (Hold) – return within 5% of Russell 3000 index return Underperform (Sell)– return >5% below Russell 3000 index return

Volatility index definition*

This is calculated from the volatility of historical price movements. Very high–highest risk – Stock should be

expected to move up or down 60–100% in a year – investors should be aware this stock is highly speculative. High – stock should be expected to move up or down at least 40–60% in a year – investors should be aware this stock could be speculative. Medium – stock should be expected to move up or down at least 30–40% in a year. Low–medium – stock should be expected to move up or down at least 25–30% in a year. Low – stock should be expected to move up or down at least 15–25% in a year. * Applicable to Australian/NZ/Canada stocks only

Recommendations – 12 months Note: Quant recommendations may differ from Fundamental Analyst recommendations

Financial definitions

All "Adjusted" data items have had the following adjustments made: Added back: goodwill amortisation, provision for catastrophe reserves, IFRS derivatives & hedging, IFRS impairments & IFRS interest expense Excluded: non recurring items, asset revals, property revals, appraisal value uplift, preference dividends & minority interests EPS = adjusted net profit / efpowa* ROA = adjusted ebit / average total assets ROA Banks/Insurance = adjusted net profit /average total assets ROE = adjusted net profit / average shareholders funds Gross cashflow = adjusted net profit + depreciation *equivalent fully paid ordinary weighted average number of shares All Reported numbers for Australian/NZ listed stocks are modelled under IFRS (International Financial Reporting Standards).

Recommendation proportions – For quarter ending 30 June 2012

AU/NZ Asia RSA USA CA EUR Outperform 55.67% 61.00% 53.43% 42.58% 69.23% 46.60% (for US coverage by MCUSA, 9.05% of stocks followed are investment banking clients)

Neutral 30.50% 22.11% 36.99% 52.41% 28.02% 33.69% (for US coverage by MCUSA, 8.14% of stocks followed are investment banking clients)

Underperform 13.83% 16.89% 9.59% 5.01% 2.75% 19.71% (for US coverage by MCUSA, 0.45% of stocks covered are investment banking clients)

Company Specific Disclosures: Important disclosure information regarding the subject companies covered in this report is available at www.macquarie.com/disclosures.

Analyst Certification: The views expressed in this research accurately reflect the personal views of the analyst(s) about the subject securities or issuers and no part of the compensation of the analyst(s) was, is, or will be directly or indirectly related to the inclusion of specific recommendations or views in this research. The analyst principally responsible for the preparation of this research receives compensation based on overall revenues of Macquarie Group Ltd ABN 94 122 169 279 (AFSL No. 318062) (MGL) and its related entities (the Macquarie Group) and has taken reasonable care to achieve and maintain independence and objectivity in making any recommendations. General Disclaimers: Macquarie Securities (Australia) Ltd; Macquarie Capital (Europe) Ltd; Macquarie Capital Markets Canada Ltd; Macquarie Capital Markets North America Ltd; Macquarie Capital (USA) Inc; Macquarie Capital Securities Ltd and its Taiwan branch; Macquarie Capital Securities (Singapore) Pte Ltd; Macquarie Securities (NZ) Ltd; Macquarie First South Securities (Pty) Limited; Macquarie Capital Securities (India) Pvt Ltd; Macquarie Capital Securities (Malaysia) Sdn Bhd; Macquarie Securities Korea Limited and Macquarie Securities (Thailand) Ltd are not authorized deposit-taking institutions for the purposes of the Banking Act 1959 (Commonwealth of Australia), and their obligations do not represent deposits or other liabilities of Macquarie Bank Limited ABN 46 008 583 542 (MBL) or MGL. MBL does not guarantee or otherwise provide assurance in respect of the obligations of any of the above mentioned entities. MGL provides a guarantee to the Monetary Authority of Singapore in respect of the obligations and liabilities of Macquarie Capital Securities (Singapore) Pte Ltd for up to SGD 35 million. This research has been prepared for the general use of the wholesale clients of the Macquarie Group and must not be copied, either in whole or in part, or distributed to any other person. If you are not the intended recipient you must not use or disclose the information in this research in any way. If you received it in error, please tell us immediately by return e-mail and delete the document. We do not guarantee the integrity of any e-mails or attached files and are not responsible for any changes made to them by any other person. MGL has established and implemented a conflicts policy at group level (which may be revised and updated from time to time) (the "Conflicts Policy") pursuant to regulatory requirements (including the FSA Rules) which sets out how we must seek to identify and manage all material conflicts of interest. Nothing in this research shall be construed as a solicitation to buy or sell any security or product, or to engage in or refrain from engaging in any transaction. In preparing this research, we did not take into account your investment objectives, financial situation or particular needs. Macquarie salespeople, traders and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions which are contrary to the opinions expressed in this research. Macquarie Research produces a variety of research products including, but not limited to, fundamental analysis, macro-economic analysis, quantitative analysis, and trade ideas. Recommendations contained in one type of research product may differ from recommendations contained in other types of research, whether as a result of differing time horizons, methodologies, or otherwise. Before making an investment decision on the basis of this research, you need to consider, with or without the assistance of an adviser, whether the advice is appropriate in light of your particular investment needs, objectives and financial circumstances. There are risks involved in securities trading. The price of securities can and does fluctuate, and an individual security may even become valueless. International investors are reminded of the additional risks inherent in international investments, such as currency fluctuations and international stock market or economic conditions, which may adversely affect the value of the investment. This research is based on information obtained from sources believed to be reliable but we do not make any representation or warranty that it is accurate, complete or up to date. We accept no obligation to correct or update the information or opinions in it. Opinions expressed are subject to change without notice. No member of the Macquarie Group accepts any liability whatsoever for any direct, indirect, consequential or other loss arising from any use of this research and/or further communication in relation to this research. Clients should contact analysts at, and execute transactions through, a Macquarie Group entity in their home jurisdiction unless governing law permits otherwise. The date and timestamp for above share price and market cap is the closed price of the price date. #CLOSE is the final price at which the security is traded in the relevant exchange on the date indicated. Country-Specific Disclaimers: Australia: In Australia, research is issued and distributed by Macquarie Securities (Australia) Ltd (AFSL No. 238947), a participating organisation of the Australian Securities Exchange. New Zealand: In New Zealand, research is issued and distributed by Macquarie Securities (NZ) Ltd, a NZX Firm. Canada: In Canada, research is prepared, approved and distributed by Macquarie Capital Markets Canada Ltd, a participating organisation of the Toronto Stock Exchange, TSX Venture Exchange & Montréal Exchange. Macquarie Capital Markets North America Ltd., which is a registered broker-dealer and member of FINRA, accepts responsibility for the contents of reports issued by Macquarie Capital Markets Canada Ltd in the United States and sent to US persons. Any person wishing to effect transactions in the securities described in the reports issued by Macquarie Capital Markets Canada Ltd should do so with Macquarie Capital Markets North America Ltd. The Research Distribution Policy of Macquarie Capital Markets Canada Ltd is to allow all clients that are entitled to have equal access to our research. United Kingdom: In the United Kingdom, research is issued and



distributed by Macquarie Capital (Europe) Ltd, which is authorised and regulated by the Financial Services Authority (No. 193905). Germany: In Germany, this research is issued and/or distributed by Macquarie Capital (Europe) Limited, Niederlassung Deutschland, which is authorised and regulated by the UK Financial Services Authority (No. 193905). and in Germany by BaFin. France: In France, research is issued and distributed by Macquarie Capital (Europe) Ltd, which is authorised and regulated in the United Kingdom by the Financial Services Authority (No. 193905). Hong Kong & Mainland China: In Hong Kong, research is issued and distributed by Macquarie Capital Securities Ltd, which is licensed and regulated by the Securities and Futures Commission. In Mainland China, Macquarie Securities (Australia) Limited Shanghai Representative Office only engages in non-business operational activities excluding issuing and distributing research. Only non-A share research is distributed into Mainland China by Macquarie Capital Securities Ltd. Japan: In Japan, research is issued and distributed by Macquarie Capital Securities (Japan) Limited, a member of the Tokyo Stock Exchange, Inc. and Osaka Securities Exchange Co. Ltd (Financial Instruments Firm, Kanto Financial Bureau (kin-sho) No. 231, a member of Japan Securities Dealers Association and The Financial Futures Association of Japan and Japan Securities Investment Advisers Association). India: In India, research is issued and distributed by Macquarie Capital Securities (India) Pvt Ltd., 92, Level 9, 2 North Avenue, Maker Maxity, Bandra Kurla Complex, Bandra (East), Mumbai – 400 051, India, which is a SEBI registered Stock Broker having membership with National Stock Exchange of India Limited (INB231246738) and Bombay Stock Exchange Limited (INB011246734). Malaysia: In Malaysia, research is issued and distributed by Macquarie Capital Securities (Malaysia) Sdn. Bhd. (Company registration number: 463469-W) which is a Participating Organisation of Bursa Malaysia Berhad and a holder of Capital Markets Services License issued by the Securities Commission. Taiwan: Information on securities/instruments that are traded in Taiwan is distributed by Macquarie Capital Securities Ltd, Taiwan Branch, which is licensed and regulated by the Financial Supervisory Commission. No portion of the report may be reproduced or quoted by the press or any other person without authorisation from Macquarie. Nothing in this research shall be construed as a solicitation to buy or sell any security or product. Research Associate(s) in this report who are registered as Clerks only assist in the preparation of research and are not engaged in writing the research. Thailand: In Thailand, research is produced with the contribution of Kasikorn Securities Public Company Limited, issued and distributed by Macquarie Securities (Thailand) Ltd. Macquarie Securities (Thailand) Ltd. is a licensed securities company that is authorized by the Ministry of Finance, regulated by the Securities and Exchange Commission of Thailand and is an exchange member of the Stock Exchange of Thailand. Macquarie Securities (Thailand) Limited and Kasikorn Securities Public Company Limited have entered into an exclusive strategic alliance agreement to broaden and deepen the scope of services provided to each parties respective clients. The strategic alliance does not constitute a joint venture. The Thai Institute of Directors Association has disclosed the Corporate Governance Report of Thai Listed Companies made pursuant to the policy of the Securities and Exchange Commission of Thailand. Macquarie Securities (Thailand) Ltd does not endorse the result of the Corporate Governance Report of Thai Listed Companies but this Report can be accessed at: http://www.thai-iod.com/en/publications.asp?type=4. South Korea: In South Korea, unless otherwise stated, research is prepared, issued and distributed by Macquarie Securities Korea Limited, which is regulated by the Financial Supervisory Services. Information on analysts in MSKL is disclosed at http://dis.kofia.or.kr/fs/dis2/fundMgr/DISFundMgrAnalystPop.jsp?companyCd2=A03053&pageDiv=02. South Africa: In South Africa, research is issued and distributed by Macquarie First South Securities (Pty) Limited, a member of the JSE Limited. Singapore: In Singapore, research is issued and distributed by Macquarie Capital Securities (Singapore) Pte Ltd (Company Registration Number: 198702912C), a Capital Markets Services license holder under the Securities and Futures Act to deal in securities and provide custodial services in Singapore. Pursuant to the Financial Advisers (Amendment) Regulations 2005, Macquarie Capital Securities (Singapore) Pte Ltd is exempt from complying with sections 25, 27 and 36 of the Financial Advisers Act. All Singapore-based recipients of research produced by Macquarie Capital (Europe) Limited, Macquarie Capital Markets Canada Ltd, Macquarie First South Securities (Pty) Limited and Macquarie Capital (USA) Inc. represent and warrant that they are institutional investors as defined in the Securities and Futures Act. United States: In the United States, research is issued and distributed by Macquarie Capital (USA) Inc., which is a registered broker-dealer and member of FINRA. Macquarie Capital (USA) Inc, accepts responsibility for the content of each research report prepared by one of its non-US affiliates when the research report is distributed in the United States by Macquarie Capital (USA) Inc. Macquarie Capital (USA) Inc.‟s affiliate‟s analysts are not registered as research analysts with FINRA, may not be associated persons of Macquarie Capital (USA) Inc., and therefore may not be subject to FINRA rule restrictions on communications with a subject company, public appearances, and trading securities held by a research analyst account. Any persons receiving this report directly from Macquarie Capital (USA) Inc. and wishing to effect a transaction in any security described herein should do so with Macquarie Capital (USA) Inc. Important disclosure information regarding the subject companies covered in this report is available at www.macquarie.com/research/disclosures, or contact your registered representative at 1-888-MAC-STOCK, or write to the Supervisory Analysts, Research Department, Macquarie Securities, 125 W.55th Street, New York, NY 10019. © Macquarie Group Auckland

Tel: (649) 377 6433

Jakarta

Tel: (62 21) 515 1818

Mumbai Tel: (91 22) 6653 3000

Singapore Tel: (65) 6601 1111

Bangkok

Tel: (662) 694 7999

Johannesburg Tel: (2711) 583 2000

Munich Tel: (089) 2444 31800

Sydney Tel: (612) 8232 9555

Calgary

Tel: (1 403) 218 6650

Kuala Lumpur

Tel: (60 3) 2059 8833

New York Tel: (1 212) 231 2500

Taipei Tel: (886 2) 2734 7500

Denver

Tel: (303) 952 2800

London

Tel: (44 20) 3037 2000

Paris Tel: (33 1) 7842 3823

Tokyo Tel: (81 3) 3512 7900

Frankfurt

Tel: (069) 509 578 000

Manila

Tel: (63 2) 857 0888

Perth Tel: (618) 9224 0888

Toronto Tel: (1 416) 848 3500

Geneva

Tel: (41) 22 818 7777

Melbourne

Tel: (613) 9635 8139

Seoul Tel: (82 2) 3705 8500

Hong Kong

Tel: (852) 2823 3588

Montreal

Tel: (1 514) 925 2850

Shanghai Tel: (86 21) 6841 3355

Available to clients on the world wide web at www.macquarieresearch.com and through Thomson Financial, FactSet, Reuters, Bloomberg, CapitalIQ and TheMarkets.com.

http://www.thai-iod.com/en/publications.asp?type=4

http://www.thai-iod.com/en/publications.asp?type=4

http://dis.kofia.or.kr/fs/dis2/fundMgr/DISFundMgrAnalystPop.jsp?companyCd2=A03053&pageDiv=02

Asia Research Head of Equity Research John O’Connell (Global Co – Head) (612) 8232 7544 David Rickards (Global Co – Head) (612) 8237 1159 Chris Hunt (Asia – Head) (852) 3922 1119

Automobiles/Auto Parts Janet Lewis (China) (852) 3922 5417 Amit Mishra (India) (9122) 6720 4084 Clive Wiggins (Japan) (813) 3512 7856 Michael Sohn (Korea) (82 2) 3705 8644

Banks and Non-Bank Financials Ismael Pili (Asia, Hong Kong) (852) 3922 4774 Victor Wang (China) (852) 3922 1479 Rachel Li (China) (852) 3922 4762 Suresh Ganapathy (India) (9122) 6720 4078 Nicolaos Oentung (Indonesia) (6221) 2598 8366 Alastair Macdonald (Japan) (813) 3512 7476 Chan Hwang (Korea) (822) 3705 8643 Matthew Smith (Malaysia, Singapore) (65) 6601 0981 Alex Pomento (Philippines) (632) 857 0899 Jemmy Huang (Taiwan) (8862) 2734 7530 Passakorn Linmaneechote (Thailand) (662) 694 7728

Conglomerates Alex Pomento (Philippines) (632) 857 0899 Somesh Agarwal (Singapore) (65) 6601 0840

Consumer and Gaming Gary Pinge (Asia) (852) 3922 3557 Linda Huang (China, Hong Kong) (852) 3922 4068 Amit Mishra (India) (9122) 6720 4084 Lyall Taylor (Indonesia) (6221) 2598 8489 Toby Williams (Japan) (813) 3512 7392 HongSuk Na (Korea) (822) 3705 8678 Alex Pomento (Philippines) (632) 857 0899 Somesh Agarwal (Singapore) (65) 6601 0840 Best Waiyanont (Thailand) (662) 694 7993

Emerging Leaders Jake Lynch (China, Asia) (8621) 2412 9007 Makoto Egami (Japan) (813) 3512 7879

Industrials Janet Lewis (Asia) (852) 3922 5417 Patrick Dai (China) (8621) 2412 9082 Saiyi He (China) (852) 3922 3585 Inderjeetsingh Bhatia (India) (9122) 6720 4087 Juwon Lee (Korea) (822) 3705 8661 Sunaina Dhanuka (Malaysia) (603) 2059 8993 David Gambrill (Thailand) (662) 694 7753

Insurance Scott Russell (Asia, China) (852) 3922 3567 Chung Jun Yun (Korea) (822) 2095 7222

Media and Internet Jiong Shao (China, Hong Kong) (852) 3922 3566 Steve Zhang (China, Hong Kong) (852) 3922 3578 Nitin Mohta (India) (9122) 6720 4090 Prem Jearajasingam (Malaysia) (603) 2059 8989 Alex Pomento (Philippines) (632) 857 0899

Oil, Gas and Petrochemicals James Hubbard (Asia) (852) 3922 1226 Jal Irani (India) (9122) 6720 4080 Polina Diyachkina (Japan) (813) 3512 7886 Brandon Lee (Korea) (822) 3705 8669 Sunaina Dhanuka (Malaysia) (603) 2059 8993 Trevor Buchinski (Thailand) (662) 694 7829 Pharmaceuticals and Healthcare Abhishek Singhal (India) (9122) 6720 4086 Eunice Bu (Korea) (822) 2095 7223 Property Callum Bramah (Asia) (852) 3922 4731 David Ng (China, Hong Kong) (852) 3922 1291 Jeffrey Gao (China) (8621) 2412 9026 Abhishek Bhandari (India) (9122) 6720 4088 Felicia Barus (Indonesia) (6221) 2598 8480 Sunaina Dhanuka (Malaysia) (603) 2059 8993 Alex Pomento (Philippines) (632) 857 0899 Tuck Yin Soong (Singapore) (65) 6601 0838 Corinne Jian (Taiwan) (8862) 2734 7522 Patti Tomaitrichitr (Thailand) (662) 694 7727 Resources / Metals and Mining Andrew Dale (Asia) (852) 3922 3587 Graeme Train (China) (8621) 2412 9035 Matty Zhao (Hong Kong) (852) 3922 1293 Christina Lee (Hong Kong) (852) 3922 3571 Rakesh Arora (India) (9122) 6720 4093 Adam Worthington (Indonesia) (852) 3922 4626 Riaz Hyder (Indonesia) (6221) 2598 8486 Polina Diyachkina (Japan) (813) 3512 7886 Chak Reungsinpinya (Thailand) (662) 694 7982 Technology Jeffrey Su (Asia, Taiwan) (8862) 2734 7512 Lisa Soh (China) (852) 3922 1401 Nitin Mohta (India) (9122) 6720 4090 Damian Thong (Japan) (813) 3512 7877 David Gibson (Japan) (813) 3512 7880 George Chang (Japan) (813) 3512 7854 Jeff Loff (Japan) (813) 3512 7851 Daniel Kim (Korea) (822) 3705 8641 Soyun Shin (Korea) (822) 3705 8659 Andrew Chang (Taiwan) (8862) 2734 7526 Daniel Chang (Taiwan) (8862) 2734 7516 Tammy Lai (Taiwan) (8862) 2734 7525 Telecoms Nathan Ramler (Asia) (813) 3512 7875 Lisa Soh (China, Hong Kong) (852) 3922 1401 Riaz Hyder (Indonesia) (6221) 2598 8486 Prem Jearajasingam (Malaysia, Singapore) (603) 2059 8989 Alex Pomento (Philippines) (632) 857 0899 Joseph Quinn (Taiwan) (8862) 2734 7519

Transport & Infrastructure Janet Lewis (Asia, Japan) (852) 3922 5417 Bonnie Chan (Hong Kong) (852) 3922 3898 Nicholas Cunningham (Japan) (813) 3512 6044 Sunaina Dhanuka (Malaysia) (603) 2059 8993 Corinne Jian (Taiwan) (8862) 2734 7522 Utilities & Renewables Adam Worthington (Asia) (852) 3922 4626 Inderjeetsingh Bhatia (India) (9122) 6720 4087 Prem Jearajasingam (Malaysia) (603) 2059 8989 Alex Pomento (Philippines) (632) 857 0899 Commodities Colin Hamilton (Global) (4420) 3037 4061 Jim Lennon (4420) 3037 4271 Duncan Hobbs (4420) 3037 4497 Bonnie Liu (65) 6601 0144 Graeme Train (8621) 2412 9035 Rakesh Arora (9122) 6720 4093 Economics Peter Eadon-Clarke (Asia, Japan) (813) 3512 7850 Richard Gibbs (Australia) (612) 8232 3935 Tanvee Gupta (India) (9122) 6720 4355 Quantitative / CPG Gurvinder Brar (Global) (4420) 3037 4036 Burke Lau (Asia) (852) 3922 5494 Simon Rigney (Asia) (852) 3922 4719 Eric Yeung (Asia) (852) 3922 4077 Patrick Hansen (Japan) (813) 3512 7876 Ayumu Kuroda (Japan) (813) 3512 7569 Strategy/Country Emil Wolter (Asia) (65) 6601 0538 Peter Eadon-Clarke (Japan) (813) 3512 7850 Chris Hunt (China, Hong Kong) (852) 3922 1119 Jiong Shao (China) (852) 3922 3566 Rakesh Arora (India) (9122) 6720 4093 Nicolaos Oentung (Indonesia) (6121) 2598 8366 Michael Newman (Japan) (813) 3512 7920 Chan Hwang (Korea) (822) 3705 8643 Yeonzon Yeow (Malaysia) (603) 2059 8982 Alex Pomento (Philippines) (632) 857 0899 Conrad Werner (Singapore) (65) 6601 0182 Daniel Chang (Taiwan) (8862) 2734 7516 David Gambrill (Thailand) (662) 694 7753 Find our research at Macquarie: www.macquarie.com.au/research Thomson: www.thomson.com/financial Reuters: www.knowledge.reuters.com Bloomberg: MAC GO Factset: http://www.factset.com/home.aspx CapitalIQ www.capitaliq.com TheMarkets.com www.themarkets.com Email [email protected] for access

Asia Sales Regional Heads of Sales Robin Black (Asia) (852) 3922 2074 Chris Gray (ASEAN) (65) 6601 0288 Peter Slater (Boston) (1 617) 598 2502 Jeffrey Shiu (China & Hong Kong) (852) 3922 2061 Thomas Renz (Geneva) (41) 22 818 7712 Andrew Mouat (India) (9122) 6720 4100 JJ Kim (Korea) (822) 3705 8799 Chris Gould (Malaysia) (603) 2059 8888 Gino C Rojas (Philippines) (632) 857 0861 Eric Roles (New York) (1 212) 231 2559 Luke Sullivan (New York) (1 212) 231 2507 Paul Colaco (New York) (1 212) 231 2496 Sheila Schroeder (San Francisco) (1 415) 762 5001 Miki Edelman (Taiwan) (8862) 2734 7580

Regional Heads of Sales cont’d Angus Kent (Thailand) (662) 694 7601 Angus Innes (UK/Europe) (44) 20 3037 4841 Rob Fabbro (UK/Europe) (44) 20 3037 4865 Sean Alexander (Generalist) (852) 3922 2101

Regional Head of Distribution Justin Crawford (Asia) (852) 3922 2065

Sales Trading Adam Zaki (Asia) (852) 3922 2002 Phil Sellaroli (Japan) (813) 3512 7837 Grace Lee (Korea) (822) 3705 8601 Jonathan Seymour (Singapore) (65) 6601 0202 Matthew Ryan (Singapore) (65) 6601 0216

Sales Trading cont’d Mike Keen (Europe) (44) 20 3037 4905 Chris Reale (New York) (1 212) 231 2555 Marc Rosa (New York) (1 212) 231 2555 Stanley Dunda (Indonesia) (6221) 515 1555 Kenneth Cheung (Malaysia) (603) 2059 8888 John Fajardo (Philippines) (632) 857 0840 Michael Santos (Philippines) (632) 857 0813 Isaac Huang (Taiwan) (8862) 2734 7582 Dominic Shore (Thailand) (662) 694 7707

MALAYSIA KPJ Healthcare - listed companykpj.listedcompany.com/misc/analyst/Macquarine... ·...

Documents

Transcript of MALAYSIA KPJ Healthcare - listed companykpj.listedcompany.com/misc/analyst/Macquarine... ·...