THE BUZZ
Last Friday KPJ has announced on Bursa Malaysia that its
major shareholder Johor Corporation
(JCorp) had on 27 Feb 2012 offered to sell its entire equity holding in PT KPJ
Medika comprising 16,000 ordinary shares
of IDR1m each, or equivalent to 80% equity in PT KPJ Medika, for a total cash
consideration of RM15.84m. KPJ said it had, via a letter dated 23 March 2012,
accepted the offer.
OUR TAKE
More on the deal.
PT KPJ
Medika (Medika) owns and
operates a private
specialist hospital known as Rumah Sakit Medika Permata Hijau
(RSMPH) in Jakarta West, Indonesia with 92 beds. KPJ has been managing
the hospital on behalf of JCorp for the last 15 years, for which KPJ receives
an annual fee of about RM0.25m. The remaining 20% stake in Medika is held
by a
local partner to comply with
Indonesia’s foreign ownership
regulations.
A good deal. The
acquisition came is as no surprise as it is in line with KPJ’s strategy to expand
its hospital network in Indonesia in order to tap the strong potential demand
for private healthcare in Indonesia. Although this is a related party
transaction (RPT), there is no cause for concern as it represents a win-win
transaction between JCorp and KPJ. Disposing of its direct interest in Medika
will enable JCorp to consolidate its healthcare business under KPJ while KPJ
would be able to build its hospital network in Indonesia. At RM15.84m for an
80% stake in Medika, this translates into a PER of approximately 8.7x on Medika’s
FY11 core net profit. As such, we view the purchase price as attractive compared
with the minimum regional sector PER of 15x PER among listed healthcare players.
The acquisition will also enable KPJ to build on its pool of resources as well
as create synergy with RS Bumi Serpong Damai, KPJ’s existing hospital in
Jakarta.
Maintain BUY. We
maintain our Buy recommendation on KPJ, at an unchanged FV of RM5.84, based on
23.1x PER on FY12 EPS. This multiple is derived from the market cap weighted average
regional sector PER. We have always liked KPJ as a stock with a growth story,
and one that is in a rather defensive sector. We reiterate our view that the stock
is an excellent long term investment.
Source: OSK188
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