Bumrungrad Hospital

Bumrungrad Hospital Plc (BH)

Slightly below estimates: BH reported a 4Q11 core profit of Bt311m, down by 9% YoY and 30% QoQ. It was 7% below our estimate due to disappointing healthcare revenue. Net profit was Bt448m, boosted by an FX gain.
The firm announced a final DPS of Bt0.65 for 2H11 (slightly better than the assumptions of ourselves and the consensus of Bt0.57-0.63), implying a 2.8% annualized yield. XD on March 12: payment on May 24.
Results highlights: The poor result was due to a GM contraction. Healthcare GM slipped to 37.3% from 39.1% in 4Q10 and 40.7% in 3Q11 because of a labor cost increase—aid to employees affected by the flooding. Healthcare revenue was Bt2.5bn in 4Q11, flat YoY and down 16% QoQ on seasonality (high season in 3Q11). BH’s patient volume declined as a result of the flooding—OPD down 10% YoY. However, pricing (billing per head) rose by 4% for OPD and a hefty 20% for IPD.
In 4Q11, BH used the accrued loss of from Bumrungrad Medical Center Ltd (it sold its 49% stake in the firm in Dec 2011) as a tax shield (Bt106m was realized in 4Q11), so paid no corporate tax in the quarter versus effective tax rates of 26% in 4Q10 and 28% in 3Q11.
Bumrungrad International Ltd (BH has a 31.5% stake) reported an FX loss from its sale of an asset in the Philippines. BH’s portion of that loss was Bt24m. The profit contribution from KH (25% stake) dropped 25% QoQ to Bt36m, due to seasonality.
Outlook: BH will post strong YoY and QoQ profit growth for 1Q12 on seasonality. In Jan 2012, patient volume posted double-digit YoY growth.
What’s changed? We maintain our profit forecast unchanged.
Recommendation: Our TRADING BUY rating stands with a YE12 target price of Bt58, based on a 20% discount to DCF value (unchanged 11% WACC and 2% terminal growth), BH looks cheap, as FY12 earnings will hit a new record, but it trades at an FY12 PER of only 17.7x (a 16% discount to its FY06-11 PER mean).
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