Bumrungrad Hospital PCL - Good News Priced In

8/10/2019 Bumrungrad Hospital PCL - Good News Priced In

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Fr i day , 14 N ov ember 2014

35Refer to last page for important disclosures.

R e g i o n a l M o r n i n g N o t e s

COMPANY UPDATE HOLD

(Maintained)

Share Price Bt135.00

Target Price Bt140.00

Upside +3.7%

COMPANY DESCRIPTION

One of the country's largest private hospitalsin Bangkok with JCI accreditation and catersto both foreign and local patients.

STOCK DATA

GICS sector Health Care

Bloomberg ticker: BH TB

Shares issued (m): 728.6

Market cap (Btm): 98,361.1

Market cap (US$m): 2,997.9

3-mth avg daily t'over (US$m): 2.8

Price Perform ance (%)52-week high/low Bt142.50/Bt82.00

1mth 3mth 6mth 1yr YTD

5.5 0.7 32.4 48.8 53.8

Major Shareholders %

Sophonpanich family 30.7

Bangkok Dusit Medical Services 24.0

UOB Kay Hian (Hong Kong) 8.4

FY14 NAV/Share (Bt) 14.90

FY14 Net Cash/Share (Bt) 0.66

PRICE CHART

90

100

110

120

130

140

150

160

170

80

100

120

140

160

(%)(lcy)BUMRUNGRAD HOSPITAL PUB CO

BUMRUNGRAD HOSPITAL PUB CO/SET INDEX

0

10

20

30

Nov 13 Jan 14 Mar 14 May 14 Jul 14 Sep 14 Nov 14

Volume (m)

Source: Bloomberg

ANALYST

Kowit Pongwinyoo+662 659 [email protected]

Bumrungrad Hospital (BH TB)

Good News Priced In

With the easing of politi cs, international patients have started to return to BH faster

than expected. The trend is expected to continue and gather momentum next year.

Coupled with expanded capacity and good operating margins, BH’s earnings growth

should reach 22% next year. However, most of the good news has been priced in.

Maintain HOLD. Target pric e: Bt140.00. Entry price: Bt120.00.

WHAT’S NEW

International patients have returned. After suffering from declining international patient

volumes as a result of political conflicts in 1H14, Bumrungrad Hospital’s (BH) international

patient volume has started coming back in 3Q14. This followed the easing politicalsituation in Thailand after the military coup in May. In 3Q14, international patient volume

increased 3% after a negative growth in the last two quarters. As we expect the political

situation in Thailand to remain calm in the foreseeable future, we expect international

patient volume to continue to improve. Leading the comeback are international patients

from the Middle East. We therefore expect another good set of results in 4Q14 and into

2015. Initially, it seems the martial law was a major obstacle to the return of international

patients. But the rising international patients at BH suggest they are ignoring the martial

law and contine to seek treatment at BH. The return of international patients is crucial to

BH’s overall performance as international revenue accounted for over 60% of its total

revenue in the past two years. The revenue proportion from international patients was

restored back to 61% in 9M14.

Sufficient capacity at Sukhumvit campus until mid-18. After opening five floors in

Bumrungrad International Clinic for outpatients in May l3, BH has just added 18 ICU bedsand 58 ward beds, raising its licensed bed capacity to 580. At the moment, BH plans to

develop a nearby building, Bumrungrad Tower (BH Residence). The company is

studying whether to renovate the building for hospital usage or to house its back-office

staff to reducing rental cost. Renovations may take one year. With all these

developments, it will esnsure sufficient capacity at the Sukhumvit campus to service both

Thai and international patients until mid-18 when the new hospital on New Pethburi Road

will open for services.

KEY FINANCIALSYear to 31 Dec (Btm) 2012 2013 2014F 2015F 2016F

Net turnover 12,982 14,346 15,484 17,913 20,306EBITDA 3,160 3,871 4,232 4,999 5,749Operating profit 2,445 2,983 3,210 3,905 4,522Net profit (rep./act.) 2,558 2,521 2,679 3,254 3,749Net profit (adj.) 1,698 2,370 2,625 3,200 3,695EPS (Bt) 2.3 3.3 3.6 4.4 5.1PE (x) 57.9 41.5 37.5 30.7 26.6P/B (x) 11.6 10.2 9.1 7.8 7.0EV/EBITDA (x) 31.0 25.3 23.1 19.6 17.0Dividend yield (%) 1.3 1.4 1.5 1.7 1.9Net margin (%) 19.7 17.6 17.3 18.2 18.5Net debt/(cash) to equity (%) (8.2) (4.0) (4.4) (12.3) (13.4)Interest cover (x) 13.2 15.8 22.9 27.1 31.2ROE (%) 33.6 27.8 26.2 27.7 30.0Consensus net profit - - 2,739 3,228 3,722UOBKH/Consensus (x) - - 0.96 0.99 0.99Source: Bumrungrad Hospital, Bloomberg, UOB Kay Hian

1






• New hospital on new Petchburi Road to be completed in mid-18. For BH’s newly

planned hospital on New Petchburi Road (near to the existing one), the company

expects to complete the EIA, the approval of 19.2% more usable area and the

construction permission by Aug 15. Construction is expected to commence in Sep 15

with completion slated at mid-17. With more usable areas, BH could allocate more

facilities there and may prepare to equip the hospital with 200 beds instead of 150 as

earlier planned. Construction cost has not yet been finalised but may be in the region of

Bt7b.

STOCK IMPACT

• EBITDA margins to continue growing. Due to the sudden increase of both Thai and

international patients during the peak season in 3Q14 while operating costs have not

yet caught up with the rising volume, BH experienced an excellent 3Q14 EBITDA

margin of 30%, the hospital’s highest so far, and reaching 28% in 9M14 (9M13: 27%).

As we expect operating costs to soon catch up with the rising volume in the following

quarters, margins may come down. We therefore expect EBITDA margin at 27% for

2014 (the same as in 2013) and 28% next year when BH treats more intensity-case

patients following the return of international patients.

• Expect strong earnings growth of 22% next year . As the return of international

patients just happened in 2H14 and the trend is expected to continue in 2015 with the

expanded capacity in place, we expect BH’s 2014 sales to grow only 8% yoy to Bt15.5b.

Sales could grow by a strong 16% yoy to Bt17.9b in 2015 on rising patient volume and

increased capacity. With good margins from intensity cases and effective cost control,

we expect 2014 and 2015 net profit to increase 11% yoy and 22% yoy to Bt2.6b and

Bt3.2b respectively.

EARNINGS REVISION/RISK

• None.

VALUATION/RECOMMENDATION

• Maintain HOLD. Although we expect BH to report reasonable growth this year and a

strong growth next year on the return of international patients, share price has factored

in the good news. At the current price, BH offers only a 4% upside to our target price of

Bt140.00, based on DCF model at a discount rate of 7%. Entry price is Bt120.00.

SHARE PRICE CATALYST

• The lifting of the martial law.

PEER COMPARISON

STOCK PE (x)

P/B

(x)

EV/EBITDA

(x)

Div Yield

(%)

ROE

(%)

CoreEarnings

Growth (%)Comp any Code 2015F 2015F 2015F 2015F 2015F 2015F

Bangkok Dusit BGH TB 31.30 5.62 21.63 1.60 18.19 24.79

Bumrungrad BH TB 30.34 7.83 19.68 1.65 27.74 21.45

Bangkok Chain BCH TB 21.45 4.59 13.73 2.33 20.02 39.61

Raffles Medical RFMD SP 27.90 3.80 20.71 1.43 14.25 12.20

IHH Healthcare IHH MK 39.88 1.97 48.25 0.47 4.93 22.92

KPJ Healthcare KPJ MK 28.06 3.03 15.17 1.69 10.46 16.81

Ramsay RHC AU 27.06 5.91 11.81 1.91 21.58 19.55

Apollo APHS IN 40.51 4.84 20.64 0.59 12.29 12.03

Loc al aver. 31.05 6.19 21.13 1.61 20.66 23.94

Total aver. 32.95 4.54 26.62 1.28 15.03 21.30

Source: Bloomberg, UOB Kay Hian

PROPORTION OF REVENUE

59% 61% 61% 61%

41% 39% 39% 39%

0%

50%

100%

2011 2012 2013 9M14

International Thai

Source: BH

SALES AND INTERNATIONAL PATIENTS

‐

100,000

200,000

300,000

400,000

500,000

600,000

‐

5,000

10,000

15,000

20,000

2010 2011 2012 2013

International patients Sales

( Btm) ( Person)

Source: BH

SALES AND EARNINGS GROWTH

118

16

40

11

22

-

5

10

15

20

25

30

35

40

45

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000 16,000

18,000

20,000

2011 2012 2013 2014F 2015F

(%)(Btm)

Sales Core profit Sales growth Core profit growth

Source: BH,UOB Kay Hian

P/B AND SD

Source: Bloomberg, UOB Kay Hian

22






PROFIT & LOSS

Year to 31 Dec (Btm)

2013 2014F

2015F 2016F

Net turnover 14,346 15,484 17,913 20,306

EBITDA 3,871 4,232 4,999 5,749

Deprec. & amort. 888 1,022 1,094 1,227

EBIT 2,983 3,210 3,905 4,522

Total other non-operating income 251 256 279 282

Associate contributions 6 0 0 0

Net interest income/(expense) (245) (185) (185) (185)

Pre-tax pro fit 2,995 3,281 3,999 4,619

Tax (625) (656) (800) (924)

Minorities

0 0

0 0

Net profit 2,521 2,679 3,254 3,749

Net profit (adj.)

2,370 2,625

3,200 3,695

BALANCE SHEET

Year to 31 Dec (Btm) 2013

2014F

2015F 2016F

Fixed assets 9,096 9,913 10,605 11,876

Other LT assets 604 1,075 1,052 960

Cash/ST investment 5,857 5,640 8,217 6,124

Other current assets 1,695 1,700 1,958 2,212

Total assets 17,252 18,329 21,831 21,172

ST debt 329 11 1,511 561

Other current liabilities 1,796 1,921 2,165 2,406

LT debt 5,143 5,149 5,155 3,661

Other LT liabilities 387 391 395 399

Shareholders' equity 9,597

10,857

12,605 14,145

Minority interest 0 0 0 0

Total liabilities & equity 17,252

18,329

21,831 21,172

CASH FLOW

Year to 31 Dec (Btm)

2013 2014F

2015F 2016F

Operating 3,135 2,949 3,634 4,482

Pre-tax profit 3,140 3,335 4,053 4,673

Tax (625) (656) (800) (924)

Deprec. & amort. 888 1,022 1,094 1,227

Associates 6 0 0 0

Working capital changes (117) (698) (660) (440)

Non-cash items (157) (54) (54) (54)

Other operating cashflows

0 0

0 0

Investing (2,119) (1,789) (1,094) (1,958)

Capex (growth) (2,119) (1,789) (1,094) (1,958)

Proceeds from sale of assets n.a. n.a. n.a. n.a.

Financing (1,193) (1,377) 36 (4,617)

Dividend payments (1,387) (1,387) (1,473) (1,627)

Issue of shares 0 0 0 (550)

Proceeds from borrowings 194 10 1,510 0

Loan repayment 0 0 0 (2,440)

Others/interest paid 0 0 0 0

Net cash inflow (outflow) (177) (217) 2,577 (2,092)

Beginning cash & cash equivalent

6,034 5,857

5,640 8,217Ending cash & cash equivalent 5,857 5,640 8,217 6,124

KEY METRICS

Year to 31 Dec (%) 2013

2014F

2015F 2016F

Profitability

EBITDA margin 27.0 27.3 27.9 28.3

Pre-tax margin 20.9

21.2

22.3 22.7

Net margin 17.6 17.3 18.2 18.5

ROA 15.2 15.1 16.2 19.0

ROE 27.8 26.2 27.7 30.0

Growth

Turnover 10.5 7.9 15.7 13.4

EBITDA 22.5 9.3 18.1 15.0

Pre-tax profit 19.9 9.6 21.9 15.5

Net profit (1.4) 6.3 21.4 15.2

Net profit (adj.) 39.6 10.8 21.9 15.5

EPS 39.5 10.8 21.9 15.5

Leverage

Debt to total capital 36.3 32.2 34.6 23.0

Debt to equity 57.0

47.5

52.9 29.9

Net debt/(cash) to equity (4.0)

(4.4)

(12.3) (13.4)

Interest cover (x) 15.8 22.9 27.1 31.2

33






Disclosures/Disclaimers

This report is prepared and/or distributed by UOB Kay Hian Pte Ltd (“UOBKH”), which is a holder of a capital markets services licence andan exempt financial adviser in Singapore.

This report is provided for information only and is not an offer or a solicitation to deal in securities or to enter into any legal relations, nor anadvice or a recommendation with respect to such securities.

This report is prepared for general circulation. It does not have regard to the specific investment objectives, financial situation and the

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representatives may also, to the extent permitted by law, transact with, perform or provide broking or other services for or solicit businessfrom, other persons in respect of dealings in the securities referred to in this report or other investments related thereto; (3) the officers,employees and representatives of UOBKH may also serve on the board of directors or in trustee positions with the subject corporation(s)referred to in this report. (All of the foregoing is hereafter referred to as the “Subject Business”); and (4) UOBKH may otherwise have aninterest (including a proprietary interest) in the subject corporation(s) referred to in this report.

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Bumrungrad Hospital PCL - Good News Priced In

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