KPJ: BUY, target price RM4.62

OSK views KPJ Healthcare's acquisition of Jeta Gardens Waterford Trust positively as it marks a new milestone for KPJ in terms of business and geographical expansion 

 
OSK Research Sdn Bhd has maintained its target price of RM4.62 and "buy" recommendation on KPJ Healthcare Bhd (5878) after the latter's wholly-owned Kumpulan Perubatan (Johor) Sdn Bhd agreed to buy up to a 51 per cent stake in Jeta Gardens Waterford Trust for RM19 million.

Separately, its associate company KPJ Al-'Aqar REIT announced the acquisition of properties owned by Jeta Gardens for RM134.9 million. Jeta Gardens is primarily involved in operating a retirement village in Queensland, Australia.

"We view the acquisition positively as it marks a new milestone for KPJ in terms of business and geographical expansion," OSK said.

The research house believes KPJ, supported by its well-established hospital network in Malaysia, is more than ready and capable of expanding beyond its existing business of providing private hospital services.
Based on KPJ's track record in turning around loss-making hospitals, OSK Research said KPJ is highly capable of doing the same for Jeta Gardens.

"With the acquisition expected to be completed in its fiscal first quarter 2011, we leave our fiscal 2010 earnings forecast unchanged. Nevertheless, pending further details from management on the acquisition, we are also leaving our fiscal 2011 forecast unchanged at this juncture.

"We'd like to reiterate that KPJ is an excellent choice for long-term investment as well as portfolio balancing as the stock offers an exciting growth story in a defensive sector that is backed by a steady dividend payout," it said.