POINT ZONE (M) SDN BHD - 2023 |
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| Report ID | 60538900469669 | Popularity | 200 views 124 downloads | |||||
| Report Date | Dec 2023 | Product | ||||||
| Company / Issuer | Point Zone (M) Sdn Bhd | Sector | Healthcare | |||||
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| Rationale |
Rating action MARC Ratings has affirmed its AA-IS(cg) rating on Point Zone (M) Sdn Bhd’s Sukuk Wakalah Programme guaranteed by KPJ Healthcare Berhad (KPJ). The rating outlook has been revised to positive from stable. Point Zone is a funding conduit set up by KPJ solely for the purpose of issuing the sukuk. The rating reflects the credit strength of KPJ by virtue of the corporate guarantee. Total outstanding under the sukuk currently stands at RM1.205 billion. Rationale The outlook revision to positive mainly reflects KPJ’s strengthening operating performance, underpinned by its improving leverage position. Meanwhile, the rating affirmation considers KPJ’s strong business profile — highest number of licensed beds among private healthcare providers and a favourable payor mix, among other factors — driven by its leading market position in the resilient Malaysian healthcare sector. This is counterbalanced by its exposure to regulatory and contingent liabilities and concerns on shortage of key medical personnel in the healthcare industry that could impede growth. MARC Ratings opines that KPJ’s ability to build a strong brand over 40 years is the key reason behind its market position as the largest private healthcare provider in Malaysia, with 29 hospitals, 3,776 licensed beds and a 22% market share based on bed count. KPJ also has presence in Bangladesh, Thailand, and Australia, but their contribution to group revenue is small; in 2022, Malaysia accounted for 96% of total revenue, 98% of which came from hospital operations. KPJ’s performance continued to be driven by favourable patient volume trends through September 2023; outpatient volume was down slightly to 2,063,630 (-1.7% annualised), but inpatient admissions showed a strong growth to 259,172 (16.3% annualised). Notwithstanding the lower outpatient volume, KPJ’s revenue in 9M2023 expanded 19.4% y-o-y as higher charges and patient severity (inpatients) more than offset the decline in outpatient volume. Its bed occupancy rate (BOR) has also improved to 67% as at end-September 2023, up 9 percentage points from 2022; this showed an overall stronger performance compared to the past five-year average of 63% excluding the periods affected by the pandemic. The rating agency views long-term industry growth as sustainable, driven by favourable demographics, increased health awareness, and growing affluence. Growing insurance penetration has, and will continue to be, a significant factor to support long-term demand for private healthcare services. KPJ’s profitability margin remains healthy; earnings before interest, tax, depreciation and amortisation (EBITDA) continue to exceed 20%, hovering around 25% in 2023. For 9M2023, revenue of RM2.55 billion on an annualised basis could reach above the RM3.0 billion mark in 2023, up by 16.6% over 2022. The growth was supported by bed capacity expansion, and contributions from newer hospitals including Damansara Specialist Hospital 2, KPJ Bandar Dato’ Onn, KPJ Batu Pahat, KPJ Perlis and KPJ Miri. For 2023, cash flow from operations (CFO) could reach around RM700 million (9M2023: RM527.4 million). In comparison, annual CFO has averaged around RM500 million over the past five years excluding periods affected by the pandemic. Total borrowings stood at about RM1.92 billion as at end-September 2023, slightly lower than the previous forecast of about RM2.0 billion. KPJ now projects its borrowings to hover around RM1.8 billion to RM1.9 billion between 2024 and 2028. As at end-9M2023, debt-to-equity (DE) ratio stood relatively unchanged y-o-y at 0.8x. Under MARC Ratings’ sensitised case assuming an average revenue growth of 10% p.a. and a lower EBITDA margin of 20% over 2024-2028, CFO interest and debt coverage are expected to be around 3.1x-4.4x and 0.2x-0.3x over the forecast period. The rating agency has kept the assumptions for dividends as per the base case (about RM260 million p.a. on average) but believes KPJ has room to reduce dividends, if needed, which would add to its financial flexibility. Liquidity position remains strong with sufficient cash balances of RM837.0 million as at end-September 2023 and undrawn banking facilities of RM158 million. Its financial flexibility stems from its listed status and its 38% interest in Al-‘Aqar Healthcare REIT, worth some RM408 million as of end-September 2023. Rating outlook The positive outlook reflects KPJ’s steadily improving performance that is expected to be supportive of strengthening its overall credit metrics. Rating trajectory Upside/Downside scenario The rating will be upgraded if the group is able to broadly maintain its operating performance growth and key credit metrics. Conversely, the rating outlook will be revised to stable if KPJ’s financial performance weakens from expectation. Key strengths
Key challenges
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