KPJ Healthcare Berhad Proposes Renewal of Share Buy-Back Authority and Shareholders’ Mandate for Recurrent Related Party Transactions

Key Points and Investor Highlights

• AGM and Resolutions: KPJ Healthcare Berhad (“KPJ”) will be tabling two major resolutions at its 33rd Annual General Meeting (AGM) scheduled for 16 June 2026:
  • Renewal of authority to buy back up to 10% of its total issued shares.
  • Renewal of existing shareholders’ mandate for recurrent related party transactions (RRPT) of a revenue or trading nature.
• Share Buy-Back Details:
  • The maximum number of shares that may be bought back is 10% of total issued shares (4,526,608,066), less current treasury shares (100,305,975), i.e., up to 352,354,831 shares.
  • The buy-backs will be funded via retained profits, which stand at RM339.08 million as at 31 December 2025.
  • KPJ may finance the buy-back through internal funds and/or external borrowings, ensuring no material impact on cash flow.
  • Shares bought back may be cancelled, held as treasury shares, distributed as share dividends, resold, or used for employee share schemes or purchase considerations.
  • Treasury shares carry no voting or dividend rights.
• Pricing:
  • Buy-backs must not exceed 15% above the weighted average market price for the previous 5 market days.
  • Resale/transfer of treasury shares must be at or above the weighted average market price, or not more than 5% below that price if certain conditions are met.
• Public Shareholding Spread:
  • Currently at 39.29%. A full buy-back would reduce this to 34.03% but must not fall below the 25% regulatory minimum.
• Rationale and Potential Impact:
  • Share buy-backs are expected to enhance Earnings Per Share (EPS) and possibly support share prices if KPJ shares are undervalued.
  • Treasury shares can be used for rewarding shareholders, resold for potential gains, or for employee share schemes.
  • Potential disadvantages include temporary reduction of financial resources and opportunity costs, but the impact is expected to be manageable.
• Historical Share Price:
  • KPJ shares have traded between RM2.34 and RM3.53 over the last 12 months, closing at RM3.42 as at 31 March 2026.
• Material Transactions in the Past Year:
  • KPJ resold 62 million treasury shares in the past 12 months, raising approximately RM181.6 million. No purchases or cancellations were made in that period.
• Code on Take-Overs and Mergers:
  • Share buy-backs could trigger mandatory general offer obligations if shareholdings of major shareholders or concert parties cross specific thresholds.
• Directors’ and Substantial Shareholders’ Interests:
  • No direct interests except for proportionate increases in their percentage holdings due to reduced share base.

Proposed Renewal of Shareholders’ Mandate for RRPT (Recurrent Related Party Transactions)

• Mandate Coverage:
  • Allows KPJ Group to transact with JCorp and related parties for various services (registrar, building management, insurance, security, medical, car park rentals, IT, etc.) on commercial terms consistent with market rates.
  • Key related parties include Johor Corporation (JCorp), Al-`Aqar Healthcare REIT, and Al-Salām Real Estate Investment Trust.
• Estimated Value:
  • Total estimated RRPT value for the coming year is RM210.25 million, with RM89.99 million actually transacted from 26 June 2025 to 31 March 2026.
  • Major components include building management (RM11m), security (RM15m), housekeeping (RM51m), renovation works (RM100m), and IT/software services (RM10m).
• Internal Controls:
  • All RRPTs are subject to internal approval thresholds and periodic audit committee reviews.
  • Directors with interests must abstain from deliberations and voting on related matters.
• Disclosure and Governance:
  • KPJ will disclose RRPT values in its annual report and must announce any transaction exceeding estimates by 10% or more.
  • Interested parties (e.g., JCorp and certain directors) will abstain from voting on the mandate at the AGM.
• Rationale:
  • The mandate streamlines business operations, enables timely transactions with related parties, and avoids repeated shareholder approvals for routine transactions, reducing administrative costs and delays.
• Effects:
  • No material impact on share capital, EPS, net assets, or dividend policy is expected, but the mandate is vital for day-to-day operations and business continuity.

Material Contracts and Litigation

• Recent Material Contracts:
  • Several business transfer agreements to streamline corporate structure and operations.
  • Project and IT support agreements (e.g., migration to Microsoft 365 worth RM25.4 million, Managed Private Cloud services valued over RM121 million).
  • Major lease renewals with Al-`Aqar (some up to 15+15 years), and sale-and-leaseback transactions of hospital buildings worth RM241 million, enhancing cash management and asset utilisation.
  • Ongoing PACS IT contract worth RM36.97 million for digital hospital imaging systems.
• Litigation:
  • KPJ and a subsidiary are pursuing legal action against former board members over alleged breaches of fiduciary duties relating to the 2018 sale of 49% in Lablink (M) Sdn. Bhd. to KL Kappa Sdn. Bhd.
  • KPJ is seeking compensation for undervaluation (RM68.7–73.6 million for share subscription and RM17.3–22.2 million for sale price), plus damages and costs.
  • The suit is ongoing and scheduled for trial in late 2026 and early 2027. No material financial impact is expected for FY2026 unless unforeseen outcomes arise.

Shareholder Action Required

• Shareholders are strongly encouraged to review the full resolutions and participate in the AGM, either in person or by proxy (submission deadline: 14 June 2026, 10:00 a.m.).
• Your approval is required for both the share buy-back authority and the RRPT mandate, both of which the Board (excluding interested directors) recommends voting in favour.

Potential Price Sensitive Information

• Renewal of share buy-back authority may support KPJ’s share price and EPS, especially if executed during periods of undervaluation.
• Material contracts and leasebacks improve liquidity and optimise capital allocation, potentially boosting investor confidence.
• Ongoing litigation outcome, if unexpectedly negative, could impact KPJ’s financials, though current risk is assessed as low.

Disclaimer: This article is for informational purposes only and does not constitute investment advice. Investors should review the official documents and consult their financial advisors before making any investment decisions. The author and publisher accept no liability for any actions taken based on this article.

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