This is the group\u2019s strategy as it embarks on its largest expansion programme to date. It has set aside RM5 billion for capital expenditure (capex) over the next five years (2026-2030), with the investment set to add 2,200 beds to its network of hospitals.<\/p>\n
The expansion will increase KPJ\u2019s total bed capacity by more than 50% to about 6,270 beds from 4,070 at the present time. KPJ, which is 44.36% owned by Johor Corp, currently operates 30 hospitals nationwide with a presence in every state except Terengganu and Melaka.<\/p>\n
\u201cBefore I think about growing from 30 hospitals to 50 or even 100, I want to make sure we have fully optimised what we already own,\u201d president and managing director Chin Keat Chyuan tells The Edge in an interview.<\/p>\n
\u201cThe RM5 billion [investment] will primarily support brownfield expansion across our existing hospitals, including new clinical towers, additional capacity and specialist facilities. We are also investing in digital health infrastructure, clinical technologies and other strategic initiatives that support the convergence of AI, genomics and value-based care. These investments will strengthen our Centres of Excellence (CoE), improve access to specialised care and support the group\u2019s long-term growth strategy.<\/p>\n
\u201cThe investment will be deployed in phases, based on project readiness and disciplined capital allocation.\u201d<\/p>\n
The detailed breakdown of the RM5 billion investment was not disclosed. Nevertheless, it marks a significant step up in spending. According to KPJ\u2019s annual reports, the group invested a cumulative RM1.73 billion in capex between 2021 and 2025, with annual spending more than doubling from RM234.7 million to RM502.4 million over the period. The latest investment commitment is almost three times what KPJ spent over the previous five years.<\/p>\n
The RM5 billion is expected to be generated through a combination of bank borrowings and sukuk. As at end-March, KPJ held RM1.1 billion in cash and deposits against RM1.62 billion in total borrowings, leaving it in a net debt position of about RM527 million. Around three-quarters of its borrowings consist of sukuk wakalah issued under a RM3 billion programme established in 2022 to finance expansion and working capital.<\/p>\n
Catching up with peers<\/p>\n
KPJ\u2019s latest expansion comes less than three years after Chin took the helm in September 2023, after having spent more than two decades with healthcare and pharmaceutical giant Johnson & Johnson. Since then, KPJ has undergone a broad transformation focused on operational efficiency, asset optimisation, cost discipline and brand repositioning.<\/p>\n
However, more needs to be done, says Chin. According to him, KPJ generated about RM1.08 million in yield per bed in the financial year ended Dec 31, 2025 (FY2025), the lowest sum among its listed peers. He believes the gap can be narrowed. But rather than just matching the competitors, he wants KPJ to raise the bar.<\/p>\n \u201cMemang (yes), in terms of yield, we are lower [compared with peers]. Maybe it\u2019s the complexity of the procedures. Maybe we don\u2019t do that much. Maybe other people are doing all the high-end, fancy procedures. Or maybe I\u2019m more cost-effective. I still treat patients, but my costs are relatively reasonable.<\/p>\n \u201cThere\u2019s a lot more that I can do. But I can only do it when I bring in the right group of clinicians and start giving them the right technology. All this will start to build up. Hopefully, with that, I will be able to improve my yield, and that is actually the direction we\u2019re heading in,\u201d he says.<\/p>\n By comparison, Sunway Healthcare Holdings Bhd (KL:SUNMED<\/a>), which was listed on the Main Market of Bursa Malaysia in March, recorded a higher yield per bed of RM1.24 million. Its bed occupancy rate was also higher at 69%, compared with KPJ\u2019s 64%, despite having a smaller capacity of 1,777 beds.<\/p>\n
Several structural factors help explain the gap. One is the hospital locations. Private hospitals in major urban centres typically serve larger populations with higher household income and insurance coverage, while also attracting more complex cases and medical tourists.<\/p>\n Roughly half of KPJ\u2019s 30 hospitals are located in major urban centres, including KPJ Damansara Specialist Hospital 2, one of the group\u2019s flagship hospitals.<\/p>\n All five of Sunway Healthcare\u2019s hospitals are in major urban centres too, led by its flagship Sunway Medical Centre in Sunway City.<\/p>\n Meanwhile, IHH Healthcare Bhd (KL:IHH<\/a>) recorded a yield per bed of RM1.42 million. Unlike KPJ and Sunway Healthcare, IHH has a more geographically diversified footprint, with operations spanning multiple markets across Asia and beyond.<\/p>\n KPJ\u2019s share price has risen from around RM1.18 when Chin joined the company to the RM3 level now, more than doubling the group\u2019s market capitalisation from roughly RM5.3 billion to more than RM13 billion. The counter closed at RM3.12 last Thursday, giving it a market value of RM13.81 billion.<\/p>\n Asked whether KPJ could eventually achieve a market capitalisation of RM20 billion to RM30 billion as it rolls out its expansion plans, Chin answers without hesitation. \u201cMy answer is yes. It\u2019s 100% possible.\u201d<\/p>\n Sunway Healthcare, meanwhile, has already surpassed a RM20 billion valuation just months after its listing.<\/p>\n M&As, joint ventures<\/p>\n As at end-March, KPJ\u2019s total assets stood at RM8.14 billion while total liabilities were RM4.97 billion. Its low net gearing of 0.17 times suggests that its balance sheet has the financial flexibility to pursue acquisitions should opportunities arise.<\/p>\n While remaining open to mergers and acquisitions and joint ventures that can create long-term shareholder value, Chin says KPJ is also exploring more efficient care delivery models as healthcare costs continue to rise.<\/p>\n For example, Chin says KPJ could consider establishing ambulatory care centres (ACCs) in markets such as Cambodia, where demand for treatment abroad has increased amid geopolitical tensions with Thailand. ACCs provide consultations, diagnostic services and day procedures for patients who do not require overnight hospitalisation. KPJ currently operates three ACCs in the Klang Valley and Perak.<\/p>\n \u201cWhy Cambodia? Because Cambodia is a significant source of health tourism patients for Malaysia. I\u2019m not talking only about KPJ, but Malaysia in general. Due to the geopolitical tensions between Cambodia and Thailand, many affluent Cambodian patients are seeking treatment overseas. That presents another pool of potential patients.<\/p>\n \u201cSo, what if I set up an ACC in Cambodia to provide primary and day-care services \u2026 With insurers continuing to raise concerns about rising healthcare costs, we need to think differently. One way is by shifting suitable low-risk cases from inpatient to outpatient care.<\/p>\n \u201cThat\u2019s where ACCs become important. If a patient\u2019s condition can be managed as an outpatient, I\u2019d rather treat them at an ACC than admit them to hospital. ACCs could therefore become part of our growth strategy, both locally and overseas,\u201d Chin says.<\/p>\n As for KPJ\u2019s overseas footprint, the company\u2019s presence is currently limited to Thailand and Australia after it exited Bangladesh and Indonesia as part of a portfolio rationalisation.<\/p>\n Chin says future overseas investments will be guided by returns rather than expansion for its own sake. \u201cWe exited Bangladesh because it wasn\u2019t contributing positively to either the top line or the bottom line. In Australia, we also divested ourselves of our aged care business because policy changes no longer supported that business model and the returns weren\u2019t meaningful for shareholders.<\/p>\n \u201cToday, we only have the retirement village business left in Australia, which has turned around in the past two years, and we\u2019re continuing to monitor its performance. Thailand remains a good business for us because Vejthani Hospital has a strong health tourism business.\u201d<\/p>\n Health tourism remains a growth opportunity<\/p>\n Health tourism remains an under-penetrated growth driver for KPJ, contributing just 6.2% to revenue in FY2025, compared with 15% for IHH Healthcare and 13.8% for Sunway Healthcare.<\/p>\n According to the Malaysia Healthcare Travel Council (MHTC), Malaysia\u2019s health tourism revenue rose 23% to RM3.35 billion in 2025 from RM2.73 billion a year earlier, while patient arrivals increased 13% year on year to 1.79 million.<\/p>\n Chin believes KPJ\u2019s integrated academic healthcare model, known as the KPJ Health System, will underpin the group\u2019s next phase of growth in medical tourism. At the centre of the strategy are its CoEs, which combine specialised clinical expertise with education, research and innovation to attract more international patients.<\/p>\n The group has already established a Heart & Lung Centre of Excellence at KPJ Johor Specialist Hospital and a Neuroscience & Stroke Centre of Excellence at KPJ Damansara Specialist Hospital 2. Under its five-year plan, KPJ aims to expand the network to 15 CoEs.<\/p>\n \u201cKPJ Health System will help us drive highly specialised services and treatments. That\u2019s why establishing CoEs is so important. I can assure you 80% of international patients coming to Malaysia are seeking treatment for heart disease, stroke, cancer and orthopaedic conditions. These are exactly the areas we are focusing on,\u201d Chin says.<\/p>\n \u201cBut how ours is going to be different is that we are working with internationally renowned hospitals such as the Mayo Clinic. We are leveraging their expertise because we are part of the Mayo Clinic Care Network. We are using their support to help us set the benchmark for what it means to be a CoE, what kind of preparation is required, what sub-specialists are needed, what technology must be in place and how to deliver a seamless patient experience. Global patients are drawn to centres that have international recognition or accreditation. And that\u2019s what we plan to achieve.\u201d\u00a0<\/p>\n Currently, international patients make up 55% of KPJ\u2019s health tourism business, with expatriates living in Malaysia accounting for the remaining 45%. Chin says KPJ aims to shift that mix to 65% international patients and 35% expatriates, as medical tourists tend to spend more and help improve bed occupancy.<\/p>\n Indonesia remains KPJ\u2019s largest source market for international patients, followed by China, Bangladesh and India. Chin did not specify the breakdown of the group\u2019s international patients.<\/p>\n Despite the weaker rupiah, Chin says the group has not seen any significant decline in Indonesian patient arrivals.<\/p>\n According to MHTC data, 87% of Indonesian patients who sought treatment in Malaysia in 2025 were health tourists who travelled specifically for medical care. This was followed by China, with Chinese health tourists accounting for 39% of patients, and India (12%).<\/p>\n \u201cI don\u2019t see a significant drop. As I said, there are always seasonal ups and downs, but the fluctuation is usually about 10% to 15%; it is not anything beyond that. In general, Indonesian patients always travel overseas. If they can afford it, they will travel abroad for healthcare. I think the Malaysian healthcare system, in general, has been relatively good and mature. Mature in the sense that whatever technology you are talking about today, I think Malaysia already has 90% to 95% of what Singapore has. But when it comes to cost and innovation, I think Malaysia is definitely much more cost-effective,\u201d Chin says.<\/p>\n Execution holds the key<\/p>\n Analysts generally view KPJ\u2019s RM5 billion expansion plan positively, noting that expanding existing hospitals typically requires less capital, carries lower execution risk and generates better returns than building greenfield hospitals. Brownfield projects also benefit from existing specialists, referral networks and infrastructure.<\/p>\n However, MBSB Research says the key question is not whether KPJ can add more beds, but whether it can improve yield per bed, margins and returns on invested capital.<\/p>\n \u201cAdding beds can increase revenue, but it does not automatically improve yield per bed. Yield per bed improves when hospitals handle more complex procedures, attract better-paying patients and operate with stronger specialist capability. To close the gap, KPJ may need to move further up the value chain by accelerating its CoEs, improving its case mix and making greater use of ambulatory care,\u201d the research house says in an email response to The Edge.<\/p>\n MBSB expects KPJ\u2019s investment plan to support steady earnings growth over the medium term but says a meaningful valuation re-rating will depend on how effectively KPJ executes its plan.<\/p>\n \u201cOur forecasts already imply earnings growth, but not dramatic acceleration. Revenue and core earnings are expected to rise gradually over FY2026-FY2028. While the investment plan supports medium-term growth, further upside will depend on KPJ demonstrating stronger execution in improving productivity and profitability,\u201d it says.<\/p>\n Other analysts believe KPJ\u2019s RM5 billion investment is manageable as it will be deployed over the next five years.<\/p>\n \u201cThis may sound large, but spread over five years, it is equivalent to RM800 million to RM1 billion annually. For a company generating around RM4 billion in revenue with healthy operating cash flow, this is quite manageable,\u201d says BIMB Securities analyst Maliana Shaharudin.<\/p>\n In terms of valuation, Sunway Healthcare continues to trade at a much richer valuation than its listed peers. On a 12-month forward basis, it is valued at 74 times price-earnings ratio, compared with 33.55 times for KPJ and 32.17 times for IHH.<\/p>\n On an enterprise value-to-earnings before interest, taxes, depreciation and amortisation basis, Sunway Healthcare trades at 33.72 times, compared with 15.48 times for KPJ and 14.41 times for IHH.<\/p>\n With its growth strategy mapped out, the next test for KPJ is execution. Whether KPJ can command a higher valuation will depend on its ability to translate its plan into stronger earnings growth.\u00a0<\/p>\n Getting ready for DRG<\/p>\n As medical inflation drives healthcare costs and insurance premiums higher, the government is pinning its hopes on the Diagnosis Related Group (DRG) payment system to make private healthcare more sustainable. Private hospital operators, however, fear the reform could squeeze margins and profitability if reimbursement rates fail to keep pace with treatment costs.<\/p>\n For KPJ Healthcare Bhd (KL:KPJ<\/a>), the impact could be significant as nearly all of its revenue is generated in Malaysia. The DRG payment system categorises patients based on the classifications of diagnoses and procedures. The patients are charged fixed rates based on those classifications, regardless of the final cost of treatment. The rollout was initially planned for last year but has been delayed until next year.<\/p>\n \u201cIt would be a lie for me to say \u2026 it (DRG) will not [have an impact]. Will DRG resolve medical inflation? I think DRG is a system pointing towards value-based care. That means they are trying to say \u2018let\u2019s focus on patient clinical outcomes and the value that we can maximise for patients instead of an activity-based kind of healthcare system. Because activity-based means every activity I do, I charge. Regardless [of] how the patient outcome is, which is not good also, if you ask me seriously\u2019,\u201d says KPJ president and managing director Chin Keat Chyuan.<\/p>\n \u201cSo now KPJ, IHH, Sunway Healthcare … Everyone has been submitting sample hospital bills of different sizes and types. They have been analysing all of these. So if you ask me, \u2018Chin, is it moving forward?\u2019 100% … We are always very grateful, as industry players, that the government and policymakers provide a platform to continuously engage with us. To me, that is very important. If people move ahead with certain policies without engaging the industry, that\u2019s tough.\u201d<\/p>\n On how KPJ plans to protect its margins ahead of the DRG rollout, Chin says cost optimisation remains an ongoing priority.<\/p>\n A key part of the group\u2019s cost optimisation strategy is centralised procurement across its network of 30 hospitals. Most of its procurement is covered by tender contracts that lock in prices, limiting exposure to short-term fluctuations in medical supply costs. The group also leverages its purchasing scale to negotiate favourable terms with suppliers, helping it keep material costs under control.<\/p>\n
\u201cWe negotiate with vendors based on volume to leverage our purchasing scale. Rather than appointing a single supplier, we panel the three most commonly used brands, giving doctors a choice while allowing us to lock in prices for two years,\u201d he says.<\/p>\n The strategy has delivered average annual procurement savings of about RM70 million over the past three years, Chin notes.<\/p>\n In FY2025, KPJ\u2019s net profit margin eased to 9.43% from 10.44% a year earlier, although it remained above the 7.97% recorded in FY2023.<\/p>\n Before DRG is rolled out in phases through 2027, the government plans to introduce a basic Medical and Health Insurance\/Takaful product with a co-payment feature to improve access to private healthcare.<\/p>\n Chin believes the proposed insurance product could significantly expand access to private healthcare, pointing to the government\u2019s estimate of about 18.1 million Employees Provident Fund contributors as a sizeable pool of potential policyholders. He says the product could particularly benefit the B40 and lower M40 groups who currently rely on public hospitals. With its extensive presence in Tier 2 and Tier 3 cities, KPJ believes it is well positioned to serve this segment.<\/p>\n \u201cI want that opportunity. Many of the T20 and part of the M40 are already insured or pay out of pocket. But if you can bring the rest of the M40 and B40 into private healthcare, that creates a much bigger healthcare ecosystem,\u201d Chin says.<\/p>\n Even so, Chin, who is also the vice president of the Association of Private Hospitals of Malaysia, argues that medical inflation cannot be addressed through payment reforms alone.<\/p>\n He says rising healthcare costs are also being driven by structural factors, including the increasing cost of medical malpractice insurance. As compensation awards in negligence cases have risen, hospitals have had to require higher insurance coverage for doctors, pushing up premiums.<\/p>\n Chin says KPJ now requires every doctor to have malpractice insurance with a minimum coverage of RM3 million, up from RM1 million previously, while specialists in higher-risk disciplines may require between RM5 million and RM10 million or more in coverage. According to him, the higher premiums associated with those coverage levels ultimately feed through to healthcare costs.<\/p>\n \u201cWhen all these costs go up, what do you think they will eventually translate into?\u201d Chin asks.<\/p>\n \u201cMedical inflation is a real problem. That\u2019s why policymakers need to look at the healthcare system in its totality, not just one component.\u201d<\/p>\n Save by subscribing<\/a> to us for P\/S: The Edge is also available on
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