In Tip-Top Shape

MIKA has started FY24 with a solid increase in revenues as well as core net profit in Q1/24 after its mixed performance in FY23. Total revenues went up by 21% (yoy) in Q1/24 to Rp1,243.1b vs. Rp1,027.5b in Q1/23 as well as 12.3% (yoy) higher vs. Rp1,107.3b in Q4/23. Last year, MIKA’s full-year total revenues were up by just 5.3% (yoy) to Rp4,264.3b in FY23 vs. Rp4,048.9b in FY22. Revenues from inpatients – the biggest slice of total revenues - have played an important role in driving the top line higher. At the bottom line, core net profit (net profit excluding non-controlling interests) has recorded a significant jump to Rp288.9b in Q1/24, or 25.3% (yoy) higher than Rp230.6b generated in Q1/23. In FY23 however, MIKA’s core net profit fell by 9.1% (yoy) to Rp916.1b vs. Rp1,008.0b in FY22. In line with improving performance, MIKA’s profitability margins and returns have also turned higher in Q1/24 vs. Q1/23. Gross profit margin, core operating profit margin as well as core net profit margin have all ticked higher in Q1/24 to 53.5%, 30.2% and 23.2%, respectively vs. Q1/23 when they were at 53.1%, 33.0%, and 24.7%, respectively. Likewise, return on assets (ROA) and return on equity (ROE) have increased at the end of Q1/24 to 14.8% and 18.9%, respectively from their respective standings at the FY23 when they were at 12.5% and 15.7%, respectively.

Self-Financed Expansion to Continue

Expansion strategy continues at MIKA as the total hospitals within its business network have increased to 30 from 27. According to MIKA’s corporate presentation for Q1/24, the maximum capacity of all 30 hospitals has reached more than 4,700 beds, and are capable to serve 297 thousand inpatients and 2.9 million outpatients, suported by 6,576 medical staffs and 2,364 non-medical staffs (based on the FY23 Company data). For FY24, MIKA has allocated between Rp800 billion and Rp1 trillion for capex, of which Rp135 billion had been disbursed in Q1/24. To finance this year’s capex, we expect MIKA to continue using its internal cash and retain its debt-free status. Its only interest expense came only from its lease liabilities worth Rp3.05 billion at the end of Q1/24 while its overall finance costs stood at Rp4.3 billion which unfortunately were not detailed in the Company’s financial statement.

Decent Upside Potential

We use three multiples to find the fair value of MIKA’s shares: the price-to-revenues ratio (P2R), the price-to-earnings ratio (PER) and the price-to-book value ratio (PBV). All three target prices generated by each of these multiples are then averaged to arrive at the blended target price of Rp3,438 per share. Compared to the last closing price on April 30th 2024 of Rp2,900 per share, the upside potential is around 19%, and at the same price the multiples are at 32.5x PER24F, 6.2x PBV24F and 8.4x P2R24F. On the other hand, there are risks being faced by the Company such as Government policies and regulations, human resources, as well as competition among its peers. These may directly and/or indirectly affect the assumptions that we are using in our valuation.