Bangkok Dusit Medical Services

Bangkok Dusit Medical Services (BGH)

4Q12 profit still solid though weakening from 3Q12
After the peak in 3Q12, BGH’s 4Q12 service revenue is projected to weaken
only by 5% QoQ. Compared with the same period of 2012, the service
revenue would increase by 22% YoY due to the medical service charge that
has increased by 3% YoY, the admission for severe diseases that has
increased by 4% YoY and also 15% YoY increase of patients which mainly
comes from the huge growth of international patients who have returned to
treatment after the flood crisis in 4Q11. Accordingly, the gross profit margin
would rise from 30.3% in 4Q11 to 33.8%. Also, SG&A/sales would decline
from 18% in 4Q11 to only 15.3% YoY. Overall, the company’s 4Q12 norm
profit is projected to stand at B1,348m or 51.4% YoY increase. For FY2012
norm profit, it would be B5.7bn, increasing by 47% as projected.
 

Network and service capacity aggressively expanded,boosting long-term growth
BGH has prepared for more competition after an arrival of the Asean
Economic Community (AEC), aiming to aggressively open new hospitals by 5
branches/year. In 2013, the company has planned to open 6 hospitals from
29 branches at end-2012 to 35 branches, and becoming 50 branches within
3-4 years ahead. The target of bed expansion stands at 6,000 units from the
current 4,130 units which would be from the service capacity expansion of
existing hospitals and the increase of hospitals in its network. Furthermore,
BGH has a plan to make more M&A, confirming its position as the leader of
private hospitals; for example, Krungdhon Hospital (KDH) of which the
shareholding would be made clear within March 2013. For the revenue
growth in 2013, the company has aimed at 14-15% growth approximately,
together with the net profit margin targeted at 13%. This hasn’t included
M&A that might be made in the future. BGH’s growth and objectives are still
in line with our forecast, as 2013 norm profit is projected at B6,720m or 17%
increase from the prior year which is the highest growth among peers.
 

Benefits most from AEC. Reiterate “BUY”, choosing as top pick
The fair value, using DCF, stands at B153 with 14.6% upside. Combined with
apparent plan of service capacity expansion and being a company with widest
network, BGH would be fully ready to benefit from the Asean Economic
Community (AEC). Accordingly,