Kenanga noted that KPJ Healthcare Berhad (KPJ)'s 9MFY24 earnings came in within earnings estimates at 72%, hence the house is keeping the BUY call with a target price at RM2.54.

9MFY24 normalised earnings up +35%yoy. KPJ's 9MFY24 revenue was up by +14.5%yoy to RM2.9b. Meanwhile, 9MFY24 normalised earnings gained +34.8%yoy to RM247.3m. The higher performance was largely contributed by the higher number of patients visits and increase in bed capacity.

Revenue for KPJ's hospitals accounted for RM2.8b in 9MFY24 (+14.8%yoy), with a PAT gain of RM248.2m (+4.4%yoy). This was largely contributed by the increase in patients visits evidenced by increase in BOR and bed capacity. Last leg of support from Australia operations. Collective revenue from the others business segment dropped by -47.7%yoy to RM50.9m, while LAT gained 5-fold to end at a deficit of -RM5.6m from a deficit of – RM35.5m in 9MFY23. KPJ's operations in Australia had been divested in early CY24, however, the abolishment of provision for Jeta Gardens are still supporting this segment.

Fundamentals support the hospital subsector. Malaysia's economic growth is expected to gain momentum by the year. Hence, the house opines that the healthcare sector remains vibrant, fuelled by strong spending by the public and private patients. Budget 2025 also allocated RM45.3b to the Ministry of Health to support healthcare quality and access for Malaysian citizens. KPJ is anticipated to continue optimising its assets, expanding bed capacity, and increasing talent acquisition in the remainder of FY24.

Kenanga made no changes to its earnings forecast at this juncture, as it believes KPJ is in the right trajectory of its FY24 performance. The PER is the healthcare sector's 3-year average, as it took note on the sectoral growth driven by notable healthcare megatrends in 2024-2025, and Budget 2025. Nevertheless, the downside risks remain to be the highly competitive talent market in the healthcare industry and the ongoing cost pressures on equipment, pharmaceuticals and labour