A Major Boost To Local Healthcare Industry

NST: Hospitals in Malaysia are expected to benefit from the Singapore government's ruling which enables its provident fund contribution to be used for medical treatment abroad.

It is understood that at least 12 hospitals in Malaysia under two hospital groups will benefit from this relaxation as more seek treatment across the causeway. The Singapore Ministry of Health on Wednesday announced that from March 1 2010, its residents can use their Medisave, equivalent to Malaysia's Account 2 in the Employees Provident Fund, to help pay for their hospitalisation abroad.

Medisave usage will be extended to hospitalisation and day surgery. However, outpatient treatment is excluded. Prior to this, the use of Medisave abroad was strict and could only be used for emergencies. The overseas hospital must also have an approved working arrangement with a Medisave accredited institution/referral centre in Singapore and patients must be referred through these centres.

The scheme will start with two providers - Health Management International (HMI) and Parkway Holdings Pte Ltd. HMI will work with Mahkota Medical Centre in Malacca and Regency Specialist Hospital in Johor while Parkway will partner nine hospitals under the Pantai Group and the Gleneagles Intan Medical Centre in Kuala Lumpur.

HMI group executive director Francis Lim Poon Thoo when contacted said that both its hospitals in Malaysia can expect long-term benefits from this liberalisation.

"The cost of procedure and stay at a six-bedded ward in a government restructured hospital in Singapore can be the same as paying the same procedure in a single-bedded room in a private hospital in Malaysia for a single room in a private hospital," Lim said.

This will also provide an opportunity for Malaysian doctors to treat Singapore patients which is a reverse of what is happening now.

Regency Specialist is under Mahkota Medical Group, which also operates the Mahkota Medical Centre in Malacca. HMI holds 48.95 per cent of the group, while Bumiputera-owned Maju Medik Sdn Bhd owns 38.42 per cent and the remaining 12.36 per cent is held by local doctors.

Lim, who is also the chief executive officer of Mahkota, expects group revenue to grow by 20 per cent in 2011 following this ruling. It is aiming for RM150 million revenue in the year ending June 30 2010.

Meanwhile, Pantai Holdings Bhd is wholly owned by Pantai Irama Ventures Sdn Bhd, which in turn is 60 per cent held by Khazanah Nasional Bhd and 40 per cent by Singapore's Parkway Holdings Ltd. Khazanah also has a 24 per cent stake in Parkway. Pantai Holdings chairman Tan Sri Mohamed Khatib Abdul Hamid said its cooperation with Parkway complies with the conditions set by the Singapore government and is a natural extension of the existing synergy between the two organisations.



Comment: So where does this leave KPJ, being the largest local player. Surely they will not be left out of the equation. This gives the earlier rumour that KPJ may be placing out new shares to a new strategic shareholder, more credibility. Medical tourism now accounts for only 4% of group revenue, but management is optimistic of expanding the business with support from govt initiatives. Currently only three of its hospitals are involved in medical tourism — Klang Valley, Kuching and Johor. It would be beneficial to both sides if KPJ places a substantial amount of new shares to Parkway or Pantai Holdings.

It makes a lot of sense if Parkway or Pantai were to maintain its grip on the region's healthcare industry. KPJ is a jewel to any regional player. KPJ aims to ride on robust domestic demand by adding 2 hospitals per year to its existing network of 19 in Malaysia. In the Private Healthcare Facilities & Services Act, which took effect in May 2006, limits competition with zoning — ie, new private hospitals are not to be built within a certain radius from each other. In this regard, KPJ has been actively procuring new projects to establish the first mover advantage.

It will also bring about a much better valuation for KPJ as its trading at just 13x 2010 PER while Parkway is at 20x. Even Bangkok Dusit and Raffles Medical are at 16x and 18x 2010 earnings respectively. What gives? Especially when you consider that KPJ is still a huge growth stock. The more respectable EV / ebitda for 2010 shows the same undervaluation: Parkway at 15.5x and Raffles Medical at 14.2x, while KPJ is at 9.2x. It makes a lot of sense to buy "cheaper earnings" into your books for Pantai or Parkway. KPJ may even get away with issuing new shares to them at a premium.

No matter how you look at the news flow, KPJ is still very much a value play and a long term investment.


p/s photos: Nia Ramadhani

Research Analysis On KPJ Healthcare

I think I have written enough on KPJ. It looks like the stock and warrants will only be back trading on 15th or 18th January. I expect KPJ to be still under the radar as there are whispers that the company could be planning a significant 10% share placement to a major Singapore health care player soon. Stay tuned.

-----------------------
Affin Securities

Consolidating its presence in Sabah
RM51m cash for a 51% equity stake in a hospital in Sabah KPJ announced that it had entered into the following agreements:
(i) A conditional share sale agreement with Sabah Medical Centre (SMC) for the acquisition of a 51% equity stake in SMC Healthcare Sdn. Bhd. (SMCH) for a cash consideration of RM51m; and
(ii) Management agreement with SMCH for the appointment of KPJ to manage the existing private and the new private hospitals of SMCH.

Under the agreement, the acquisition also includes all SMC’s assets, business and operations, together with a parcel of leasehold land measuring 1.685 ha. This piece of land is located in front of SMCH, and is comparable in size to the latter. It is intended for use for the construction of a new private medical centre. SMCH also agrees to appoint KPJ to manage the existing and new SMC facility for 5 years effective from 1st Jan 2010, subject to renewal. KPJ, in turn, will receive management fees of 3% of SMCH’s monthly gross revenue. The acquisition will be financed from internal funds, and is expected to be completed by 1Q10.

Second hospital in Sabah
SMCH has net assets of RM80m, and hence the acquisition price translates into a P/NA of 1.3x. SMCH will be KPJ’s second hospital in Kota Kinabalu after Damai Specialist Hospital. SMCH is currently the largest hospital among the 3 existing hospitals in KK, with about 100 beds. As the hospital building is currently owned by the state government, SMCH will have to pay rentals while KPJ will manage and own 51% of the business. As for the new hospital to be developed in the adjacent land, SMCH will submit its development plan once the acquisition is completed. KPJ has estimated a RM80m capex for the development cost.

Currently, the existing company that owns the land has a cash of RM40m. Hence, the JV will need to secure about RM40m of borrowings to make up the shortfall.
Maintain BUY; TP adjusted to RM3.00 (suspension until 15th Jan 2010). No change in our earnings projections. The new acquisition is expected to support KPJ’s long-term earnings growth. The stock has been suspended for the completion of a share split, bonus issue and warrants exercise, and will resume trading around 15th – 18th Jan 2010, together with the listing of warrants.

Reference price for the stock has been adjusted to RM2.60, and correspondingly, our price target is adjusted to RM3.00 (FY10 PE target of 15x), based on an enlarged share base but before dilution from warrants. The free warrants are already in the money (exercise price at RM1.70). Maintain BUY.

---------------------------

OSK Securities

Following the sharp price appreciation, some might wonder whether is there any more upside on KPJ’s share price and whether the potential upside been priced in. Although KPJ’s valuation appears to be relatively expensive on a historical basis, we believe there is more upside to the share price as the stock is still trading at a discount to its regional peer average PER of 18.5x. At 18.5x PER on the fully diluted FY10 EPS, we arrive at a TP of RM2.95 and maintain our BUY recommendation. We reiterate our view that KPJ is an excellent choice for long term investment and portfolio balancing in view of its resilient business and steady dividend payout as well growth potential in a defensive sector.

Closing the valuation gap.
Following the strong price appreciation, there has been a significant upward rerating for KPJ’s valuation, which is currently trading at around 16x PER on FY10 EPS. We believe the upward rerating on the valuation is justifiable given that despite the significant price appreciation, KPJ remains a cheaper alternative to its regional peers. We believe the improvement in liquidity, coupled with its position as the only pure private hospital provider listed in Malaysia and the inclusion of KPJ as a member of FBM100 Index, should further justify the higher valuations for the stock Raising its expansion game. Under its previous business expansion strategy, KPJ was aiming to add at least one new hospital each year either through acquisitions or buildinggreenfield hospitals. As its existing hospitals have matured and stabilised, KPJ is ready toembark on a more aggressive expansion strategy by targeting to add at least two new hospitals every year from 2010 onwards, which is in line with its goal to achieve RM2bn revenue by 2012, which we believe is reasonable. Yesterday, KPJ announced its first acquisition for 2010 via the proposed acquisition of a 51% stake in SMC Healthcare SB (SMCH), which owns of Sabah Medical Centre for RM51m.

Maintain BUY. We maintain our forecast but have adjusted our EPS based on an enlarged number of shares following the 1-into-2 share split, 1-for-4 bonus issue and 1-for-4 freewarrants issue. We have imputed an enlarged number of shares from 211.1m previously to659.5m, which takes into account full exercise of the free warrants. We value KPJ at 18.5x PER on FY10 EPS, which is based on its regional peer average, as we believe KPJ deserves a higher valuation as it offers comparable earnings performance as well as future growth potential. At 18.5x PER, we arrive at a TP of RM2.95 and maintain our BUY recommendation. Despite the strong rally leading up to the ex-date of the entitlements, the track record of similar corporate exercises by mid-cap peers is inconclusive and KPJ could well continue its strong rally. KPJ’s should resume trading the latest by next week on completion of the bonus issue and share split exercise.


p/s photos: Janice Man

Further Updates On Notion Vtec & KPJ

As I have been following both shares closely, I will comment on recent developments on both companies, which are really quite interesting.

This announcement is dated 6 January 2010.
Announcement Details :

Table 1
Name of Director	Name of Registered Holder	Date of Acquisition	Purchase Price per share	Number of Ordinary Shares of RM0.50 each acquired	% of Issued Shares#
Thoo Chow Fah	Choo Wai Sook	6 January 2010	RM2.75	100,000*	0.07*

Comment: A director buying at RM2.75. Its not a significant size, but the timing is significant.

Type	:	Announcement
Subject	:	NOTION VTEC BERHAD (“NVB” or “Company”) Private placement of up to ten percent (10%) of the issued and paid-up share capital of the Company (“Private Placement”)
Contents	:	Further to our earlier announcements made on the Private Placement, HwangDBS Investment Bank Berhad, on behalf of the Board of Directors of NVB, is pleased to announce that the Company has on 6 January 2010 fixed the issue price for the new 13,844,694 ordinary shares of RM0.50 each in NVB (“NVB Shares”) to be issued pursuant to the Private Placement (“Placement Shares”) at RM2.44 per Placement Share. The issue price of RM2.44 per Placement Share represents a discount of approximately 10% to the volume weighted average market price of NVB Shares for the five (5) market days immediately preceding 6 January 2010 of RM2.7066. Details of the placee, who is a strategic corporate investor, will be announced upon the completion of the Private Placement, which is expected to be no later than 20 January 2010. This announcement is dated 6 January 2010.

Finally, supposed to be in December, about one month late. Its whom will be taking up the placement which will be important, not the price. Please read posting on Notion Vtec back in October:

http://malaysiafinance.blogspot.com/2009/10/why-i-like-notion-vtec-tons-of.html

Type	:	Announcement
Subject	:	KPJ HEALTHCARE BERHAD (“KPJ” OR “COMPANY”) ACQUISITION BY KUMPULAN PERUBATAN (JOHOR) SDN. BHD. (“KPJSB”), A WHOLLY-OWNED SUBSIDIARY OF KPJ OF 40,800,000 ORDINARY SHARES OF RM1.00 EACH, REPRESENTING 51% EQUITY INTEREST IN SMC HEALTHCARE SDN BHD (“SMCH”) FROM SABAH MEDICAL CENTRE SDN BHD (“SMC”) FOR A CASH CONSIDERATION OF RM51,000,000 (“PROPOSED ACQUISITION”)
Contents	:	The Board of Directors of KPJ (“Board”) wishes to announce that KPJSB, which is a wholly-owned subsidiary of KPJ, had on 6 January 2010 entered into the following agreements:- (a) a conditional Share Sale Agreement (“SSA”) with SMC for the acquisition of 40,800,000 ordinary shares of RM1.00 each (“Sale Shares”) which is equivalent to 51% of equity interest in SMCH from SMC for a cash consideration of RM51,000,000 (“Purchase Consideration”); (b) Shareholders Agreement with SMC to regulate their relationship as shareholders of SMCH; and (c) Management Agreement with SMCH for the appointment of KPJ to manage the existing private and the new private hospitals of SMCH. The details of the announcement are as per attached. This announcement is dated 6 January 2010.

Comment: Very interesting announcement during the share split and ex period for bonus and free warrants. How significant is the acquisition. Well, industry insiders will tell you that there were a lot of bidders for SMCH, and for KPJ to even get 51% is nothing short of a coup. 51% for RM51m, have you tried building a hospital now for less than RM150m??? ... thats why its a coup.


p/s photos: Fiona Xie

KPJ - Revisited

KPJ did well for the last few days. In fact, it did very well for the whole of 2009. The company is soundly managed with good fundamentals, as was stated in my previous posting on KPJ.

http://malaysiafinance.blogspot.com/2009/12/why-i-like-kpj-healthcare-lot.html

Timing was correct, took me by surprise that it announced the ex-all date so soon. Here comes the interesting bit. The ex-all date is 6 January 2010. If you take the remaining days left:

30 Dec Wed
31 Dec Thu
4 Jan Mon
5 Jan Tue
6 Jan Wed
7 Jan Thu

Technically, the savvy traders who did not want to pick up shares but get a slice of the bonus / splits / free warrants, could buy on Thursday 31 Dec and would just make the ex-all date of 6 Jan. However, the company has also announced that the shares will be suspended on Monday, 4 Jan to make way for the split first. If we were to understand this correctly, why would you suspend 2 days before the ex-all? Does it mean that on Tuesday 5 Jan the shares would trade on a split basis (i.e. if shares were at RM6.40 before Monday 4 Jan, it will trade at RM3.20 on 5 Jan Tuesday?

Just read the announcement: "Please be advised that the trading of KPJ shares will be suspended with effect from 9.00 a.m., Monday, 4 January 2010 in order to facilitate the Share Split. The suspension will continue until the completion of the same." The last phrase that the suspension will continue until the completion of the same, can be read as indefinite. If they take longer than one day, they can.

What the announcement was not clear is whether the shares will only be suspended for that ONE day on Monday 4 Jan. It could be that the shares could go suspended till 6 Jan for the ex-all. If that is the case then the last two days to buy to get the "loot" will be today and tomorrow only!!!

If its the first scenario, whereby the shares come back on 5 Jan on a split basis at RM3.20 ... who do you think will be SELLING? Nobody, that's who! Why would you want to hold for the split only to sell after the split - when everybody knows the real action is in the bonus shares and free warrants. Hold another day for the 1-for-4 bonus and 1-for-4 free warrants. Which means on the Tuesday 5 Jan, KPJ share price could be in for another jump, if this scenario holds true.



I don't know for sure which scenario will play out but it will be very interesting to watch. Bursa, please make sure companies make announcement properly, if its suspended for ONE day, say so. If its indefinite, say so. Btw, holders of KPJ should be sleeping soundly and be ready for a great start to the new year. The free warrants are looking mighty attractive now and should trade around RM1.00 after ex-all.

Subject	:	KPJ - NOTICE OF BOOK CLOSURE
Contents	:	1) Subdivision of every existing one (1) ordinary share of RM1.00 each in KPJ Healthcare Bhd ("KPJ" or the "Company") into two (2) new ordinary shares of RM0.50 each in KPJ ("Shares") ("Share Split") 2) Bonus issue of up to 105,525,308 new ordinary shares ("Bonus Shares") of RM0.50 each ("Shares") in KPJ Healthcare Bhd ("KPJ" or the "Company") to be credited as fully paid-up, on the basis of one (1) Bonus Share for every four (4) Shares in KPJ after accounting for subdivision of every existing one (1) ordinary share of RM1.00 each in KPJ into two (2) new Shares in KPJ. 3) Issue of up to 131,906,635 free warrants ("Free Warrants") in KPJ Healthcare Bhd ("KPJ" or the "Company") on the basis of one (1) Free Warrant for every four (4) ordinary share of RM0.50 each in KPJ ("Shares") after accounting for subdivision of every existing one (1) ordinary share of RM1.00 each in KPJ into two (2) new Shares in KPJ and bonus issue of up to 105,525,308 Shares on the basis of one (1) new Share for every four (4) Shares in KPJ. Kindly be advised of the following : 1) The above Company's securities will be traded and quoted [ "Ex - All" ] as from : [ 6 January 2010 ] 2) The last date of lodgement : [ 8 January 2010 ] 3) Retention Money : Where securities are not delivered in time for registration by the seller, then the brokers concerned :- a) Selling Broker to deduct [ 1/3 ] , of the Selling Price against the Selling Client. b) Buying Broker to deduct [ 20% ] of the Purchase Price against the Buying Client. c) Between Broker and Broker, the deduction of [ 1/3 ] of the Transacted Price is applicable.

Subject	:	KPJ-Suspension of trading arising from proposed share split of each ordinary share of RM1.00 in KPJ into two (2) ordinary shares of RM0.50 each ("Share Split")
Contents	:	Please be advised that the trading of KPJ shares will be suspended with effect from 9.00 a.m., Monday, 4 January 2010 in order to facilitate the Share Split. The suspension will continue until the completion of the same.

p/s photos: Chrissie Chau

Why I Like KPJ Healthcare (A Lot)

Normally, it would take a lot to be convinced of a GLC (kind-of, since its Johor Corp at the helm). KPJ has shifted from a bunch of weak holders to much stronger shareholders. There has also been a significant jump in the strategic thinking of senior management. I would have to say that KPJ ranks right up there in terms of GLCs that are being managed very professionally and adopting global best practices. KPJ’s extensive network now includes 26 private specialist hospitals consisting of 20 in Malaysia, 3 in Indonesia, 1 in Bangladesh and 2 in Saudi Arabia.



Recent developments:
a) The opening of Tawakal hospital, which was initially scheduled in 4Q09, will be slightly delayed. Construction has already been completed, awaiting CF in Dec 2009 and hospital license thereafter. The hospital will hence only commence its operation in Feb 2010.
b) Indonesia hospital under management was hit by Sumatera earthquake. The hospital in Padang (Rumah Sakit Selasih), owned by Johor Corp, was hit by the recent earthquake in Sumatera.
c) There is still an operating loss from its new Penang Specialist Hospital, which was opened in the middle of this year as it usually takes around 2-3 years for a new hospital to turn profitable.

Regional Mindset - Recently, the Group was appointed by a Vietnamese firm to undertake feasibility studies to set up a private hospital in Vietnam and there is a chance of KPJ being awarded the contract to manage the hospital if the project materialised. Depending on the terms and conditions, the Group might also take up a small stake in the project. The Group is also eyeing opportunities for hospital management in China and Philippines. KPJ should not face any difficulty expanding its hospital management services abroad since foreign partners are satisfied with KPJ‘s good track record in Malaysia supported by the group’s physical resources, financial strength and competent human capital resources in undertaking hospital management challenges.

Preparing To Corner Medical Tourism - KPJ is currently evaluating the proposal for Ampang Puteri Specialist Hospital to apply for international healthcare accreditation from Joint Commission International (JCI) in order to boost its reputation as an international hospital. Accreditation from JCI and several other international organisations has been used as a quality benchmark and selling point by international hospitals in attracting medical tourists. KPJ is also tapping on the lucrative medical tourism market in light of Malaysia fast becoming known as an affordable healthcare hub in Asia. According to the online investment news service NuWire Investor, Malaysia ranks third amongst the world’s top medical tourism destinations, after Panama and Brazil. The number of medical tourism patients has tripled since 2003 to 341,288 patients in 2007, while for the first nine months of 2008, more than 282,000 foreigners sought
medical treatment in Malaysia.

Catalyst #1: Discount Or Premium - This stock is mainly covered by local research houses, which is a pity because its operational performance and strategic execution will entice many foreign funds. Many have their buy recommendations on the stock with a price target of RM6.00. That is based on 12x-13x PE on our FY10 EPS estimate, which is a 30% discount to regional peers’ valuations. Now, why do we need to put a discount on KPJ???????????? Considering its growth potential, its excellent de-gearing exercise, its strategic management to nurture human resource, its careful acquisition strategy, it ability to turn around loss making hospital operations ... and its plans to go regional to leverage its business model... why should it be at a discount, in fact if anything, it should be at a premium. Assuming zero discount, the target price would be fairly valued at RM7.80.

Strong Dividend Yield - As explained during my talk, I like stocks with a good consistent dividend yield. That shows that major shareholders are willing to stick to holding the stock for longer term capital appreciation, and in exchange would still enjoy decent dividend yields so that they need not sell down their shares. Its dividend yield of 7% to 8% is attractive, supported by its resilient business model. According to a recent press report, KPJ’s MD indicated that the company is likely to close a deal with another one or two hospitals. Continuous expansion in hospital network will sustain KPJ’s long term growth.

Catalyst #2: Timing Couldn't Be Better - NOTICE IS HEREBY given that an Extraordinary General Meeting ("EGM") of KPJ Healthcare Berhad ("KPJ" or the "Company") will be held at the Tanjung Puteri 303, Persada Johor International Convention Centre, Jalan Abdullah Ibrahim, 80000 Johor Bahru, Johor, on Monday, 21 December 2009 at 12.30 p.m.

KPJ HEALTHCARE BERHAD ("KPJ" OR "COMPANY") - PROPOSED ACQUISITION BY MAHARANI SPECIALIST HOSPITAL SDN. BHD. (MSHSB), A WHOLLY-OWNED SUBSIDIARY OF KPJ, OF MAHARANI SPECIALIST HOSPITAL BUILDING FROM PROPERTY BASE DEVELOPMENT SDN. BHD. (VENDOR) FOR A CASH CONSIDERATION OF RM22,000,000 (PROPOSED ACQUISITION)
The Board of Directors of KPJ ("Board") wishes to announce that the Company's wholly-owned subsidiary,MSHSB had on 16 December 2009 entered into a conditional Sale and Purchase Agreement ("SPA") with the Vendor for the proposed acquisition of a piece of freehold land on which is erected a partially completed building ("Maharani Specialist Hospital Building") for a cash consideration of RM 22,000,000 ("Purchase Consideration").

Interesting Purchases By Directors - Company director, Datin Paduka Siti Sa'diah Sh Bakir, on 3 December 2009, bought 109,000 shares in KPJ, bringing her stake to 424,100. Company director, Tan Sri Dato' Muhammad Ali Hashim, on 1 December 2009, bought 72,400 shares in KPJ, bringing his stake to 281,800 shares. Company director, Hj Ahamad Bin Mohamad, on 1 December 2009, bought 10,000 KPJ shares, bringing his stake to 57,100. Johor Corp, on 2 December 2009, bought 200,000 shares in KPJ, bringing its stake to 106.223m shares.

Turnaround Record - The Group has maintained its track record by nurturing 3 out of 4 of its “sick” or unprofitable hospitals back to break even this year. Four of KPJ’s hospitals rang up losses in 2007, namely Kuching Specialist Hospital, KPJ Kajang Specialist Hospital, Perdana Specialist Hospital, Kota Bharu and Kota Kinabalu Specialist Hospital. This year the Group had once again proved its mettle in turning around “sick” or unprofitable hospitals to break even this year, except for Kota Kinabalu Specialist Hospital. As a result, we should expect some margins improvement at the Group level. The main reason Kota Kinabalu Specialist Hospital remains in the red is the preference for government hospitals and low health insurance coverage there. However, the hospital is expected to break even in 2009.

Strategic Thinking On Human Resource Management & Supply Chain - KPJ is targeting around 1800 students for its nursing colleges by the end of this year. Over the long term, KPJ aims to have around 8000 students, with a 10% contribution to the Group’s bottomline. Upon the completion of its KPJ Penang Specialist Hospital in Bukit Mertajam by year-end, the existing Bukit Mertajam Hospital will be converted into a nursing college catering to students from the northern region. Although the earnings contribution from nursing education is expected to be relatively small, the colleges provide KPJ with a reliable and consistent supply of professionally-trained nurses. This is a clear advantage for KPJ given that the sector is facing a shortage of doctors and nurses.

Degearing & Clever Usage Of REIT To Unburden Balance Sheet - This can be said to be a smart way of deploying and managing capital. Seriously once a hospital is profitable and has a good business model, it will be able to pay down the rental easily as part and parcel of doing business. That being the case, there is no need to own the building. Using REIT this way forces hospital management to operate on a more transparent costing model, forces more efficiencies in terms of managing its capital and expenses. KPJ has announced the disposal of its remaining building assets into Al-Aqar REIT at a total consideration of RM296.4m, which will be satisfied via the issuance of 123.025m new units in Al-Aqar and a cash consideration of RM179.5m. Apart from unlocking the value of its assets, the disposal will also enable the Group to finance its expansion strategy without straining its balance sheet, particularly its gearing, as around RM157m of the cash proceeds will be used to repay bank borrowings.

REIT's Special Dividend - Although KPJ will have an effective holding of 55% in Al-Aqar REIT upon the completion of the proposed disposals, it will maintain its holding at associate level by actively looking for a strategic investor to take up some of its shareholding in the REIT. Management has indicated that the Group is in the midst of negotiating with several foreign investors with special focus on Middle East investors given the Islamic nature of the REIT - well, considering what happened over there, we can say talks are in limbo. In the event that KPJ is unable to find a suitable partner in 6 months, it will reduce its holding in the REIT to associate level by distributing it as dividend in-specie to its shareholders. Hence, it looks like shareholders could be in for a special dividend in REIT shares soon.

	Individual Period		Cumulative Period
	Current Year Quarter	Precending Year Corresponding Quarter	Current Year to Date	Precending Year Corresponding Period
	30/09/2009	30/09/2008	30/09/2009	30/09/2008
	RM'000	RM'000	RM'000	RM'000

Revenue	361,487	329,736	1,071,009	944,804
Profit/(Loss) before Tax	37,029	30,087	104,503	90,377
Profit/(Loss) after Tax and Minority Interest	26,807	21,312	73,522	63,189
Net Profit/(Loss) for the Period	29,966	22,686	80,572	67,846
Basic Earnings/(Loss) per Shares(sen)	12.88	10.31	35.40	30.56
Dividend per Share(sen)	10.00	7.00	10.00	7.00
			As At the End of Current Quarter	As At the Preceding Financial Year End
NTA per Share(RM)			2.8400	2.7700

Catalyst #3: Earnings Visibility - Their year end is 31 December. For the first 3 quarters this year, it has registered a net profit of RM80.57m or a net EPS of 35.4 sen. If you assume the 4Q will be the same as 3Q, then add another 12.88 sen to that = 48.28 sen. Considering that it still has much upside with some loss making hospitals, coupled with two new hospital acquisitions this year, earnings should be much better next year.

Catalyst #4: Corporate Actions - This ties in with the timing thing, the whole shebang should be approved and underway. PROPOSED SHARE SPLIT INVOLVING THE SUBDIVISION OF EVERY EXISTING ONE (1) ORDINARY SHARE OF RM1.00 EACH IN KPJ INTO TWO (2) ORDINARY SHARES OF RM0.50 EACH (SHARES) IN KPJ HELD BY THE ENTITLED SHAREHOLDERS OF THE COMPANY ON AN ENTITLEMENT DATE TO BE DETERMINED AND ANNOUNCED LATER (PROPOSED SHARE SPLIT); PROPOSED BONUS ISSUE OF UP TO 105,525,308 NEW SHARES (BONUS SHARES), TO BE CREDITED AS FULLY-PAID UP BY THE COMPANY, ON THE BASIS OF ONE (1) BONUS SHARE FOR EVERY FOUR (4) SHARES HELD BY THE ENTITLED SHAREHOLDERS OF THE COMPANY AFTER THE PROPOSED SHARE SPLIT ON AN ENTITLEMENT DATE TO BE DETERMINED AND ANNOUNCED LATER (PROPOSED BONUS ISSUE); AND PROPOSED ISSUE OF UP TO 131,906,635 FREE WARRANTS IN KPJ (FREE WARRANTS) ON THE BASIS OF ONE (1) FREE WARRANT FOR EVERY FOUR (4) SHARES HELD BY THE ENTITLED SHAREHOLDERS OF THE COMPANY AFTER THE PROPOSED SHARE SPLIT AND PROPOSED BONUS ISSUE ON AN ENTITLEMENT DATE TO BE DETERMINED AND ANNOUNCED LATER (PROPOSED FREE WARRANTS ISSUE). THE PROPOSED SHARE SPLIT, PROPOSED BONUS ISSUE AND PROPOSED FREE WARRANTS ISSUE SHALL COLLECTIVELY BE REFERRED TO AS PROPOSALS.

So, say you bought 10,000 shares at RM5.60 = RM56,000. After the exercise you will get 20,000 shares plus 5,000 bonus shares (it says after the share split). Plus 5,000 free warrants. Its current paid up is 209.736m shares. Even assuming the share price does not jump, the free warrants itself will give you a tremendous fillip. Better liquidity is a strong plus.

KPJ announced that the exercise price for its free warrants has been fixed at RM1.70. This represents a 15% discount to the theoretical ex-all price based on the 5-day volume weighted average market price. Based on the exercise price of RM1.70, the warrants should trade at RM0.50-0.75 at a minimum.






The above were views on stocks and sectors that I like, not an invitation to buy or sell. It serves as a blogging activity of my investing thoughts and ideas, this does not represent an investment advisory service as I charge no subscription or management fees (donations are welcomed though). The content on this site is provided as general information only and should not be taken as investment advice. All site content, shall not be construed as a recommendation to buy or sell any security or financial instrument. The ideas expressed are solely the opinions of the author. Any action that you take as a result of information, analysis, or commentary on this site is ultimately your responsibility. Consult your investment adviser before making any investment decisions.

p/s photo: Sharon Xu