Bumrungrad Hospital

Bumrungrad Hospital Plc (BH)

- 3Q13 normalized profit grows 37%yoy, better than
expected, due to good income and expense control
BH's 3Q13 income from hospital business grew 4.9%qoq and 11.1%yoy as
expected. Though inpatient and outpatient volume slightly dropped yoy,
3Q13 medical and service fee rose by 7%yoy, revenue intensity (outpatient)
increased by 3.9%, and average income per day (inpatient) rose by 3.4%
yoy. Operating cost rose by 6.1%yoy and administrative expense increased
4.7%yoy, lower than expected and at the slower rate than income, due to
efficient expense control. Thus, BH's 3Q13 net profit was B703m, better
than expected but falling 40.5%yoy, as B664m extraordinary net income
from investment selling in affiliated BCH was recognized in 3Q12. Excluding
extraordinary items, 3Q13 net profit grew by 37%yoy.
- Revise up FY2013-2014 net profit to reflect better-than expected profit growth
BH's 4Q13 profit is likely to drop from 3Q13 due to seasonal effect.
However, due to common illness in winter, tourism season, as well as 30%
increase in service capacity for outpatients and 5% increase in service
capacity for inpatients, which have been effective since mid-2013, 4Q13
normalized profit is projected to grow vigorously yoy. 9M13 net profit made
up 81% of FY2013 earnings forecast. Thus, we revise up FY2013-2014 net
profit averagely by 6.5%/year. Under new revision, FY2013 normalized
profit is projected to rise by 24% and by 16% in FY2014, which would be
the most outstanding growth in health sector. BH plans to expand the
service capacity to support long-term growth by two construction projects.
The first one is a seven- or eight-storey building in Soi Nana 1, 50 meter
away from the hospital, which will be used as a laboratory, check-up center
and rehabilitation center, taking two years to complete. The second one is a
big building on New Petchaburi road, which will be used as medical center
for women and children, taking three years to complete. The new buildings
would boost BH's capacity to get ready for a vigorous increase in number of
patients after AEC liberalization. BH is currently seeking locations and
conducting a feasibility study for acquisition of other hospitals in Bangkok to
be the second brand of middle-level hospitals and expand its income base.
This issue has not been included in our forecast.
- Strong growth continuously. Best in health sector. Reiterate "BUY".
BH's profit is likely to grow continuously, most outstandingly in health
sector. Moreover, BH will be boosting service capacity aggressively from
2013 on. FY2014 fair value under new revision (DCF) at B120 implies 35%
upside. We reiterate "BUY", as BH is the top pick of the sector.