Thursday 28 Mar 2024
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Healthcare sector 
Maintain neutral.
The two healthcare stocks under our coverage — KPJ Healthcare Bhd and IHH Healthcare Bhd — reported financial year 2014 (FY14) core earnings that were within both our and market expectations. 

Both companies reported earnings growth as well as margin improvements. 

Both companies saw earnings before interest, taxes, depreciation, and amortisation margin improved by approximately two percentage points each. 

We believe the improved margins could be attributed to better operational efficiency, continued ramp-up of beds and price reversions.

While margins improved last year, we foresee some pressure in the coming  quarters as the goods and services tax (GST) is rolled out in April. Both KPJ and IHH expect input costs to increase by 2% to 4% when the GST is implemented but this will be partially mitigated by price reversions.  With new hospitals coming on stream and expanding capacity, we expect flattish margin growth this year. — AmResearch, March 24

 

This article first appeared in The Edge Financial Daily, on March 25, 2015

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