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JP Morgan sees KPJ issuing special dividend soon

KUALA LUMPUR (Nov 8): JP Morgan has raised the target price of KPJ Healthcare Bhd to RM7.10 per share from previous RM6.60, saying growth of the company is on tract and a special dividend may be announced in less than two months.

In a positive report on KPJ, which commands 22% market shares in the local healthcare sector, JP Morgan's analysts said: "With on-track capacity expansion, we expect KPJ's steady asset-light capacity expansion to drive 22% p.a. 3-year EPS CAGR with ROEs rising from 15.9% in 2011 to 21% in 2014."

"We raise our PT to RM7.10, largely on base-year rollover and lower risk-free rate.... Trades at FY12/13E P/E of 24.5x/20.2x are a steep discount to local peer IHH and comfortably below regional peers. Watch out for a potential dividend surprise," it added.

KPJ was trading at RM6, down one sen, at 3.05pm today.

JP Morgan noted that KPJ has added three brown-field hospitals this year and said it expects these hospitals to be earnings accretive within the next 12-months.

It said: "We believe KPJ will continue to adopt its asset light growth model by injecting its hospital assets into Aqar REIT, which minimises its asset base while keeping net gearing at a minimum…

"Based on recent asset injection into Aqar REIT, we believe there is scope for special cash dividends/dividend in specie given management's intention to maintain a below 50% stake in Aqar REIT (from current 53%) to avoid the consolidation of debt."

It anticipates a cash/share payout of 6 sen or yield of 1% over and above its RM0.13 estimate.

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