20140729-Maybank_KERPL-Muted_growth；HOLD_prefer_BGH_12页_1mb

Bumrungrad Hospital (BH TB) Summary

Core Content

Bumrungrad Hospital (BH TB) is a leading healthcare provider in Thailand with a strong structural growth profile. The current share price is THB122.00, with a target price of THB115.00, indicating a -6% discount. The market capitalization is USD2.8B, and the average daily turnover is USD5M. Despite a muted growth in the current quarter, the stock has shown a strong performance with a 37% increase year-to-date.

Main Points

• Financial Forecast:

  • 2Q14 net profit is forecasted at THB620m, which is -3% QoQ but +7% YoY.
  • Hospital revenue is expected to rise 4% YoY to THB3,619m.
  • EBITDA is projected to increase by 7% YoY, with an EBITDA margin of 27.4%.
  • The forecast suggests that 2Q14 and 1H14 net profits will contribute 23% and 46% of the FY14 projection.

• Growth Drivers:

  • Annual price adjustment and rising price intensity.
  • Tight cost control and margin expansion.
  • Expected recovery in patient traffic from 3Q14 onwards.

• Challenges:

  • Political uncertainty and its impact on patient traffic.
  • Slower-than-expected international patient recovery as a downside risk for 2H14.

Key Information

• Share Price Performance:

  • 52-week high/low: THB123.50 / THB76.00.
  • YTD increase: 37%.
  • MTD increase: 5%.
  • 1Mth: 5.2%.
  • 3Mth: 25.1%.
  • 12Mth: 40.2%.

• Valuation Metrics:

  • Core FD P/E (2015F): 33.5x.
  • P/BV (2015F): 7.1x.
  • EV/EBITDA (2015F): 16.0x.
  • PEG (2015F): 1.4x.
  • The stock's EV/EBITDA is 6% higher than regional peers and 14% higher than global peers.

• Analyst Recommendations:

  • Maybank maintains a HOLD rating with a target price of THB115.
  • Consensus target price is THB110.50.
  • The stock's PER premium to the market is at 1SD above the long-term average.

Comparison with BGH

• BGH Preference:
  • Stronger hospital network.
  • Solid earnings growth with a 3-year CAGR of 20%.
  • Potential for M&A in the next six months.
  • Maybank prefers BGH over BH due to these factors.

Financial Breakdown

• Revenue:

  • FY12A: THB12,982.5m.
  • FY13A: THB14,346.0m.
  • FY14E: THB16,268.4m.
  • FY15E: THB19,468.2m.
  • FY16E: THB23,054.8m.

• EBITDA:

  • FY12A: THB3,256.1m.
  • FY13A: THB3,961.9m.
  • FY14E: THB4,417.1m.
  • FY15E: THB5,356.2m.
  • FY16E: THB6,348.6m.

• Net Profit:

  • FY12A: THB2,559.2m.
  • FY13A: THB2,520.8m.
  • FY14E: THB2,711.5m.
  • FY15E: THB3,359.1m.
  • FY16E: THB4,084.6m.

Balance Sheet

• Cash & Short Term Investments:

  • FY12A: THB6,034.1m.
  • FY13A: THB5,857.2m.
  • FY14E: THB6,621.4m.
  • FY15E: THB7,484.8m.
  • FY16E: THB7,646.8m.

• Total Assets:

  • FY12A: THB15,984.7m.
  • FY13A: THB17,251.5m.
  • FY14E: THB18,634.7m.
  • FY15E: THB20,473.0m.
  • FY16E: THB22,947.8m.

• Total Liabilities:

  • FY12A: THB7,474.2m.
  • FY13A: THB7,654.6m.
  • FY14E: THB7,954.4m.
  • FY15E: THB7,925.0m.
  • FY16E: THB8,156.0m.

• Shareholders Equity:

  • FY12A: THB8,510.5m.
  • FY13A: THB9,597.0m.
  • FY14E: THB10,680.3m.
  • FY15E: THB12,548.0m.
  • FY16E: THB14,791.9m.

Cash Flow

• Free Cash Flow:

  • FY12A: THB1,348.1m.
  • FY13A: THB651.5m.
  • FY14E: THB2,368.4m.
  • FY15E: THB2,832.8m.
  • FY16E: THB2,285.5m.

• Capital Expenditure:

  • FY12A: THB2,140.1m.
  • FY13A: THB2,276.2m.
  • FY14E: THB1,598.1m.
  • FY15E: THB2,089.9m.
  • FY16E: THB3,535.9m.

Expansion Plan

• BH plans to build a 220-bed hospital on Petchburi Road, scheduled to be completed by end-2016.
• Total capacity is expected to increase by 37% in 2018.
• Total capex is set at THB14.3b, funded by internal cash flow, excess cash from debentures, and gains from the sale of Kasemraj hospitals.

Valuation and Risk

• The current valuation is considered unattractive compared to BGH.
• Political uncertainty and slower-than-expected international patient recovery are the main risks.
• The stock is currently trading higher than its peers in all price multiples.

Key Ratios

• Growth Ratios:

  • Revenue growth: 16.6% (FY12A), 10.5% (FY13A), 13.4% (FY14E), 19.7% (FY15E), 18.4% (FY16E).
  • EBITDA growth: 17.4% (FY12A), 21.7% (FY13A), 11.5% (FY14E), 21.3% (FY15E), 18.5% (FY16E).

• Profitability Ratios:

  • EBITDA margin: 25.1% (FY12A), 27.6% (FY13A), 27.2% (FY14E), 27.5% (FY15E), 27.5% (FY16E).
  • Net profit margin: 19.7% (FY12A), 17.6% (FY13A), 16.7% (FY14E), 17.3% (FY15E), 17.7% (FY16E).

• Liquidity & Efficiency:

  • Current ratio: 3.6 (FY12A), 3.6 (FY13A), 3.4 (FY14E), 3.2 (FY15E), 2.8 (FY16E).
  • Days receivable outstanding: 34.1 (FY12A), 33.1 (FY13A), 28.6 (FY14E), 23.2 (FY15E), 19.0 (FY16E).

• Leverage & Expense Analysis:

  • Debt/EBITDA: 1.5 (FY12A), 1.3 (FY13A), 1.1 (FY14E), 0.8 (FY15E), 0.7 (FY16E).
  • Capex/revenue: 16.5% (FY12A), 15.9% (FY13A), 9.8% (FY14E), 10.7% (FY15E), 15.3% (FY16E).

Conclusion

• Maybank maintains a HOLD rating for BH, with a target price of THB115.
• The stock is overvalued relative to its peers and lacks near-term catalysts.
• BGH is preferred due to its superior network, less volatile growth, and potential M&A opportunities.