KUALA LUMPUR (July 19): Shares in KPJ Healthcare Bhd surged as much as five sen or 4.9% to RM1.07 today after the midday break, following news reported over the weekend that it could be a target of privatisation by its largest shareholder Johor Corp (JCorp). The plan, however, has reportedly been shelved amid the pandemic.

On market close, the stock pared one sen to close four sen or 3.92% higher than the previous day at RM1.06, giving it a market capitalisation of RM4.54 billion. It saw 10.99 million shares traded.

Year-to-date, the stock has risen by 6% from when it was trading at RM1. Over the past one year, the stock has soared 34.18% from the 79 sen it was trading in July 2020.

In its latest publication for the week starting July 19, The Edge Malaysia weekly wrote, citing sources, that JCorp was in talks to privatise KPJ Healthcare. The plan involved JCorp partnering global private equity fund TPG.

The privatisation plan came about after JCorp, in early 2020, considered options for its investment in KPJ Healthcare and was looking at proposals from investors and bankers. It eventually decided to take the private hospital operator off Bursa Malaysia jointly with TPG.

The weekly wrote that TPG was planning to build a regional chain of primary healthcare hospitals through the tie-up with KPJ Healthcare. The KPJ chain of 28 hospitals in Malaysia would complement the Columbia Asia Hospital chain that TPG acquired in September 2019 together with the Hong Leong group for US$1.2 billion.

“There was a plan that was put into action to take KPJ Healthcare private early last year, and they were going to do it with the help of TPG. However, the plan was shelved due to the Covid-19 pandemic,” a source was quoted as saying.

It further cited sources familiar with the matter as saying that any privatisation offer must ensure that JCorp would hold the majority stake in the privatised company.

JCorp's stake in KPJ Healthcare is held by Capaian Aspirasi Sdn Bhd. Through the company, it owns 44.2% of KPJ Healthcare, which at last Friday's closing price of RM1.02 is worth RM2 billion. It also has interest held via an Islamic trust, through Waqaf An Nur Corp Bhd.

Based on the group's annual report, the other major shareholders of the group include Employees Provident Fund with an 11.28% stake and Kumpulan Wang Amanah Persaraan (KWAP) with a 5.35% stake in the company.

In the first quarter ended March 31, 2021 (1QFY21), KPJ Healthcare's net profit declined 62.4% to RM15.24 million, owing to a fall in revenue as a result of lower patient numbers.

The group recorded 712,547 patients in 1QFY21, compared with 743,970 patients in the same quarter of 2020.

The Covid-19 pandemic and the various Movement Control Orders (MCOs) affected KPJ Healthcare's operations, with its bed occupancy rate (BOR) in 1QFY21 plunging to 39%, from 65% in the corresponding quarter last year.

Owing to the extended MCOs this year, KPJ Healthcare's BOR has continued to remain low. In May, the rate was just around 38%.

Analysts expect it to have remained low in the second quarter of the year, with the reimplementation of the MCO.