KPJ: Healthcare Group Reports Mixed Earnings, Maintains Resilient Operational Outlook

A leading healthcare provider announced a mixed financial performance for the nine months ended September 2025 (9M25), with net profit falling short of market expectations, despite robust operational growth and resilient revenue. The group’s 9M25 net profit of RM233.1 million accounted for 61.6% of full-year forecasts and 66.1% of consensus estimates, primarily due to higher-than-expected finance costs and tax expenses.

Financial Performance Review

Despite the net profit miss, the group’s EBITDA remained in line with estimates, reaching 74.1% of projections. The 9M25 period saw an 8.3% year-on-year increase in net profit, accompanied by an 8.8% rise in revenue to RM3.1 billion. This growth was largely driven by a surge in patient volumes, the expansion of medical tourism initiatives, and improved revenue intensity stemming from more complex procedures and an enhanced case mix. For the third quarter of 2025 (3Q25) alone, EBITDA grew by 8.2% year-on-year to RM274.2 million, underpinned by 9% higher average revenue per inpatient and 4% higher average revenue per outpatient, alongside a 4% increase in outpatient volumes.

The group also declared a fourth interim dividend of 1.23 sen per share for FY25, bringing the year-to-date dividend to 4.23 sen per share, slightly up from 4.15 sen in FY24.

Operational Highlights and Challenges

Operational efficiencies played a significant role, with five hospitals in their earnings gestation period showing improved performance. Notably, the newly opened Kuala Selangor hospital achieved EBITDA positive on a monthly basis within just five months, attributed to steady revenue growth and an accelerated start to full-capacity operations. However, challenges persist, particularly with inpatient volumes remaining flat. This stagnation is largely due to medical inflation and pressures from payors, including requirements for upfront advance diagnostic testing and limitations on certain procedures for inpatients. Bed occupancy rates in 3Q25 stood at 66%, a decrease from 73% in 3Q24, primarily due to an increase in operational capacity.

Following a review of net finance costs and effective tax rates, as well as a reduction in anticipated inpatient volumes by approximately 3.2%, analysts have revised down FY25-27 earnings estimates by 9.3%, 7.9%, and 6.8% respectively, citing these factors as impacting future profitability.

Future Outlook

Looking ahead, the group expects its gross profit margin to remain resilient, supported by ongoing operational efficiency initiatives and asset optimisation programmes. These efforts are anticipated to offset rising costs and bolster demand from payors. Health tourism is projected to be a key growth driver, with revenue expected to increase by approximately 15% in FY25. This growth is anticipated to be fueled by an influx of patients from Indonesia, Vietnam, Cambodia, Bangladesh, China, and the Middle East. Furthermore, the group plans to expand its bed capacity, aiming for 4,000 beds by the end of 2025 and 4,150 beds by 2026, focusing on hospitals with bed occupancy rates exceeding 75%.