KPJ (5878) - Technical and Fundamental analysis

Technical Analysis


- From a long term view, there is an upward trend since 2011 and KPJ challenged the upward line twice in past (RM0.815 @ April 16, 2018; RM0.870 @ Aug 20.2019).

- Meanwhile, KPJ shares price traded in a downward parallel line.

- As long as KPJ able to trade above the long term uptrend, we hold an upward opinion for KPJ shares performance.

- Based on daily/weekly/monthly charting, RSI shows a turning point for KPJ from bearish to bullish so we believe it is a save entry point for long term investor.

- Additionally, KPJ management starts to share buyback program in July 2019 with average pricing above RM0.90.

- Resistance 2: RM1.010

- Resistance 1: RM0.950

- Support 1: RM0.870

- Support 2: RM0.825

Healthcare/Hospitality Svcs/Med Devices


- Refer to the sub-sector for Hospitality Services, we able to notice KPJ PE 22.50 is cheaper than IHH PE 78.890 and TMCLIFE PE 42.190.

- Furthermore, ROE/DY of KPJ is highest than peers in the market. (KPJ CU DY: 2.20 %; ROE: 9.045)

- So KPJ is cheaper and higher profitable than IHH and TMClLIFE.

Fundamental Analysis


a) Overview

- Based on the latest financial announcement, Current ROE/Revenue/Earning is below our benchmark. So we believe that KPJ is struggling to maintain its business growth in severe market condition.

- Although average DY in the past 4 years is above 4% but Current DY drop until 2.16%. KPJ is not a good counter for dividend investor due to unstable dividend payout record.

b) Last 4Q announcement vs Financial Statement Y2018

- With last 4Q financial announcement, we able to notice KPJ still unable to provide a better financial performance in Y2019.

- There is no significant improvement in all level of financial ratio.

- Thus, KPJ still under moderate business growth.

c) Market Prospect Ratio

- We noticed KPJ EPS reduced significantly in Y2017 due to right issue activities on Sept 11, 2017 (Subdivision 1: 4).

- In Y2018, due to KPJ unable to generate better business growth, EPS drop more than 50% compare to Y2019.

- As a value investor, we should try to avoid a counter which has a huge fluctuation in EPS and right issue cum unstable profit company because it will wipe out your hard earn profit.

- Even KPJ management able to maintain a dividend payout ratio +/- 50%, it is still unable to cover the depreciation of shares price.

- So if you are pure fundamental investor, you will feel wired that why you unable to profit-taking on this counter. The entry point will play a crucial point for your successful trade.

d) Profitability Ratio

- KPJ management was able to maintain their performance in current business scale with flat profitability ratio.

- Higher in ROC was mainly contributed by the increase in the number of patient visits, a number of beds and surgeries, particularly for KPJ Rawang, KPJ Pasir Gudang and KPJ Bandar Maharani hospitals, which also recorded high profit during the financial year.

- KPJ said a 5% growth was reported in Malaysia segment from RM797.4mil as at 1Q18 to RM839.3mil as at 1Q19 mainly contributed by the increase in a number of patient visits and surgeries especially for KPJ Rawang, KPJ Pasir Gudang and KPJ Johor. - In addition, the newly-opened hospital, KPJ Perlis and KPJ Bandar Dato’ Onn are also contributing factors to the double-digit increment to the revenue of the period.

(Source: https://www.freemalaysiatoday.com/category/highlight/2019/02/19/kpj-healthcare-posts-higher-profit-of-rm179-mil-for-2018/)

- In term of the growth rate of revenue vs COGS in the past 4 years, we able to conclude KPJ able to control the cost of business efficient with a steady growth of gross margin.

e) Efficiency Ratio

- As per their bursa filing, KPJ focus on improvement in operational efficiency. coupled with strict cost discipline throughout the years which is proven by flat efficiency ratio in the last 4 years.

- However, the rising cost in the healthcare industry will be their main concern to sustain their competitive in severe market conditions.

- 80% of its patients being insurance holders so account receivable turnover ratio is flat and no significant fluctuation across the years

- The growth rate for account receivable and account payable is in line with their current business. No red flag in their business operational.

g) Liquidity Ratios

- Liquidity ratios improve steadily in the past 4 years.

- We believe KPJ management able to continue 50% dividend payout ratio in future with better in Quick ratio.

h) Solvency Ratios

- Although KPJ is trying to expand their number of hospital, there are no significant increase in debt ratio and debt equity ratio.

- As a conclusion, we stay positive on KPJ business growth in future.


©2019 by Dividend Investor.

Email: hongweigiet222@gmail.com

Location: Malaysia

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