MANAGEMENT DISCUSSION AND ANALYSIS OPERATIONS REVIEW With the easing of COVID-19 cases and return to normalcy, there was a strong rebound in patient visits in 2022, particularly those seeking elective treatments. This has led to strong operating metrics for the KPJ Group, such as increased patient volume and higher bed occupancy rate. KPJ Group’s financial earnings rebounded in 2022 and are on track to return to pre-COVID-19 level. Hence, unlike in 2021, Al-`Aqar did not provide any rental support to the KPJ Group in 2022. On 23 December 2022, Al-`Aqar completed the acquisitions of KPJ Pasir Gudang, the extended building of KPJ Seremban and the extended building of Taiping Medical Centre for a total consideration of RM192.0 million, satisfied by combination of RM167.0 million cash and 20.5 million units worth RM25.0 million. The acquisition of these properties is in line with the Group’s strategy in diversifying its rental income and reducing reliance on any single property. ASSET ENHANCEMENT INITIATIVES To enhance the value of our properties, we implement asset enhancement measures such as retrofitting, lift replacement, water piping replacement and repainting. In FY2022, asset enhancement initiatives totalled RM9.8 million: CATEGORY AMOUNT (RM) Completed - Civil and structural 381,825 - Mechanical & Electrical 767,180 Sub Total 1,149,005 Ongoing - Expansion 3,307,200 - Civil and structural 234,000 - Mechanical & Electrical 4,719,768 - Repainting 400,000 Sub Total 8,660,968 TOTAL 9,809,973 LEASE RENEWALS AND RENTAL REVIEW Under current lease arrangement, the majority contractual lease term is 15 years with an option to renew for an additional 15 years. The contractual lease term is mostly divided into 5 rental terms of 3 years which shall be reviewed upon expiry of each rental term. Lease Renewal. In 2022, no contractual leases expired. Looking into 2023, five properties, namely KPJ Perdana Specialist Hospital, KPJ Sentosa KL Specialist Hospital, KPJ Kajang Specialist Hospital, Kedah Medical Centre and KPJ Kuantan Care & Wellness Centre have contractual leases up for renewals in June 2023. Al-`Aqar’s lease renewal schedule is as follows: YEAR NO. OF PROPERTIES % OF RENTAL INCOME CONTRIBUTION (2022) FY2023 5 12.89 FY2024 8 15.93 FY2025 1 8.62 Rental Review. In 2022, Al-`Aqar has renewed the 3-year rental of KPJ Tawakkal KL Specialist Hospital which contributed 8.6% of Al-`Aqar’s revenue in FY2022, an upward revision of 2.0% from the last rental. Moving to 2023, Jeta Garden’s rental is up for review in November 2023. Al-`Aqar’s rental review schedule is as follows: YEAR NO. OF PROPERTIES % OF RENTAL INCOME CONTRIBUTION (2022) FY2023 1 5.13 FY2024 9 49.98 FY2025 2 7.75 47 1. Corporate Overview 3. Strategic Performance 5. Governance Structure 2. The Driving Forces 4. Sustainability Statement 6. Financial Reports
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