Operating Performance Analysis

ROIC Analysis:

IF we look into the return on invested capital of the two hospital , we can see that the rate of return of Bumrungrad Hospital always higher than Bangkok Dusit Hospital except in the period 2001-2002.However, the investment of Bangkok Dusit Hospital is very much higher then its competitor .If in the year 2001, the invested capital of Bangkok Dusit Hospital was 2.4 billions, then in 2004 it grew up rapidly to 11 billions due to acquisition of several hospitals which includes Samitivej PLC, BNH Medical Centre Co., Ltd., and several hospitals in the eastern, southern, and northeastern regions of Thailand, including Bangkok Pattaya Hospital Co., Ltd., Bangkok Rayong Hospital Co., Ltd., Bangkok Phuket Hospital Co., Ltd., Bangkok Hadyai Hospital Co., Ltd., and Bangkok Ratchasima Hospital Co.The acquisition brought down the FCFF of the Dusit hospital to -6 billions in 2004 and the ROIC in 2005 dropt to 6.4%.However, it didnt affect the investors confidence as it was the consequence of acquisition and it will provide higher ROIC in future.In case of Bumrungrad Hospital, its performance is almost stable.There is no big change in it invested capital as the hospital has not concentrated on growth and expansion.What the hospital earn , it returns to investors , that was why the ROIC from 2001-2002 was 9.87% and in 2004-2005 was 35.4%. However, there was a change in performance of the hospital when it decided to expand in 2005-2006 , it leads to the drop of ROIC to 26.8%

FCFF Analysis:

There is two opposite financial decisions in the two hospitals. If in case of Bangkok Dusit Hospital , the decision is expansion and growth , then in case of Bumrungrad Hospital, there is no growth at all from 2001-2005 except 2002-03 period . It was the reason why the FCFF of Bangkok Dusit Hospital is always negative, particular in the year 2004 due to the huge acquisition whereas for Bumrungrad , the FCFF kept on growing in the year 2001 to 2005 except 2002-03 in which the hospital decided to expand from -96% to 85% re-investment. The year 2005-06 was the first year from 2001 the hospital decided to expand more than its capacity and it turned it FCFF to negative sign.From the data, we can see that the big problem of Bangkok Dusit hospital is too much expansion and Bumrungrad is lack of expansion in its operation. In order to over these problems, the Bangkok Dusit Hospital had decided to slow down its investment and cut down its expenses where as Bumrungrad Hospital decided to expand its business and reduce the Rate of Return when brought its Re-investment rate to 110%.

Operation profit margin(OPM) analysis:

The operation profit margin of Bangkok Dusit Hospital was almost stable except in the year 2004 it dropt to 6.78% due to the acquisition. The operating profit margin always maintain at the rate of 9-10% ,it means the performance of the hospital is well manage and the investors need not to worry about its profit earning capacity. However, it also indicates that the hospital does not find way to improve its profit margin .In order to over come this problem, the hospital has decided to cut down expenses and stop recruiting staff as it has already satisfy the current demand. At the same time, it also tries to cut down the interest expense by reducing debt which is the most concern problem the hospital has faced.

For Bumrungrad hospital, the operating profit margin kept on growing through efficient performance and limited expansion. However, the profit margin dropt down from 18.5 to 13.1 due to expanded decision in the year 2006.

Growth Rate (OA) Analysis:

The growth rate of the hospital depends on the different amount invested capital in the current year and the previous year. Therefore, due to the re-investment amount, the growth rate also increases rapidly in case of Bangkok Dusit Hospital. The growth rate of this hospital had risen to top in the year 2004 due to acquisition. In case of Bungrungrad Hospital, there is no high growth at all except in the year 2002-2003.In the year 2005-06, the hospital management decided to expand its business, it result in the increase of growth rate form 8.3% to 29.5% .

Operating Asset Turnover Analysis:

In common, both hospital have good management efficiency in using its operating asset to produce profit. However, the Bumrungrad hospital has better performance as its OAT keep on increasing from 1.2 to 2 in 2006.The Bangkok Dusit hospital tries to maintain its OAT at 1 ; however, in the year 2004 it rose to 1.2 due to the performance of its subsidiaries which it acquired during the year.

Economic Value Added Analysis:

Both hospital provide economic value added as it always earn excess amount. It indicates that both company not only has ability to repay to lenders, shareholders but also has extra amount to add value to these hospitals. The amount of EVA of Bangkok Dusit Hospital is lesser than Bumrungrad hospital is not because it performs worse than its competitor but its due to the amount it re-invest to expand its business. This is the basic reason why the EVA is less and turned to negative sign in 2004-05 periods due to the acquisition.