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Bumrungrad Hospital (BH TB) Summary

Core Content

Bumrungrad Hospital (BH TB) is a leading healthcare provider in Thailand, with a strong financial position and strategic growth plans. The company's share price is THB89.00, with a market capitalization of USD 2.0B and a target price of THB105.00, representing an 18% increase. The company is rated as a BUY, with a focus on its strong operational performance and growth prospects.

Main Points

• Patient Volume Recovery: Despite the impact of political turmoil in Jan-Feb 2014, patient volume has recovered faster than expected. The company reported a 30% MoM increase in Feb 2014. The management expects patient revenue to grow by 13% in 2014, with a stable EBITDA margin at 27%.
• Revenue Growth and Profitability: The company is projected to have a strong performance in 2014, with net profit expected to grow by 10% and a 3-year CAGR of 14% (2013-2016). BH's ROE is expected to remain high at 27% for 2014-2015, which justifies its high valuation.
• Competition and Market Shifts: While BH faces competition from Middle East hospitals, particularly in the UAE, the impact is considered minimal due to BH's focus on tertiary care, lack of quality doctors in the ME, and the DRG payment model. BH is also expanding into new markets like Myanmar and Indonesia, which show high potential due to economic growth and a lack of adequate healthcare infrastructure.
• Capacity Expansion: BH plans to expand its capacity by adding 18 ICU beds and 58 ward beds in 2014 and is set to start construction of a 220-bed hospital in Petchburi in 1H14. The total CAPEX is set at THB13.8b, funded by internal cash flow and excess cash from debentures and investments.
• Strong Balance Sheet: BH has a net cash position, with a net debt to EBITDA ratio of -0.2x in 2013. The company's interest coverage ratio has improved, and it is expected to maintain a healthy financial position to support its expansion plans.
• Valuation and Performance: The target price of THB105.00 is derived from a DCF model, implying 7x PBV and 28x PER. BH's PER is trading at a 7% discount to global peers and an 18% discount to regional peers. The company's strong financial metrics and growth potential make it the top pick in the healthcare sector.

Key Information

• Financial Highlights:
  • Revenue: THB12,982.5m (FY12A), THB14,346.0m (FY13A), THB16,268.4m (FY14E), THB18,932.2m (FY15E), THB21,704.1m (FY16E)
  • EBITDA: THB3,256.1m (FY12A), THB3,961.9m (FY13A), THB4,417.1m (FY14E), THB5,211.5m (FY15E), THB5,982.6m (FY16E)
  • Core Net Profit: THB1,699.9m (FY12A), THB2,466.4m (FY13A), THB2,711.5m (FY14E), THB3,243.3m (FY15E), THB3,788.1m (FY16E)
  • Net Dividend Yield: 2.0% (FY12A), 2.1% (FY13A), 2.3% (FY14E), 2.7% (FY15E), 3.2% (FY16E)
  • ROAE: 22.3% (FY12A), 27.2% (FY13A), 26.7% (FY14E), 28.1% (FY15E), 28.2% (FY16E)
  • ROAA: 11.5% (FY12A), 14.8% (FY13A), 15.1% (FY14E), 16.7% (FY15E), 17.8% (FY16E)
  • EV/EBITDA: 16.2x (FY12A), 15.9x (FY13A), 14.3x (FY14E), 11.9x (FY15E), 10.3x (FY16E)
  • Net Debt/Equity: Net cash in all periods
• Key Ratios:
  • Core FD P/E: 48.3x (FY12A), 33.3x (FY13A), 30.3x (FY14E), 25.3x (FY15E), 21.7x (FY16E)
  • P/BV: 7.6x (FY12A), 6.8x (FY13A), 6.1x (FY14E), 5.2x (FY15E), 4.5x (FY16E)
  • Core Net Profit Growth: 10.2% (FY12A to FY13A), 9.9% (FY13A to FY14E), 19.6% (FY14E to FY15E), 16.8% (FY15E to FY16E)
• Outlook:
  • BH expects a strong recovery in the domestic market, especially in Q3 2014.
  • The company plans to increase its capacity from 543 beds to 783 beds by 2018.
  • International patient volume is expected to return to normal levels during BH's high season in Q3.

Conclusion

Bumrungrad Hospital is a top pick in the healthcare sector due to its strong financial performance, operational improvements, and strategic expansion plans. The company is expected to recover from the political turmoil and achieve its growth targets, supported by its solid balance sheet and competitive advantages in the region.