Bangkok Dusit Medical Plc

Bangkok Dusit Medical Plc (BGH)

BGH is raising fund through B10bn convertible bonds issuance and
475 million shares allocation (General Mandate) for further
investment including seven new acquisition deals, helping to increase
business value albeit 4.76% dilution effect. Buy on weakness.

- Raise fund to support CD and General Mandate
BGH’s Board resolved to approve the reduction of the registered capital from
B1,704m to B1,549m, equivalent to the paid-up capital, and the increase in
the registered capital by issuing 1,006.9 million ordinary shares at the par
value of B0.10 each, mounting the total registered capital to B1,649.79m. The
fund raising is meant to facilitate 1) the issuance and offering of convertible
bonds (CD) in the amount of not exceeding B10bn, with the term of not more
than five years from the issue date, the conversion period of approximately
40 days after the issue date to 10 days before the maturity date, and the
conversion price calculated by reference to the market price of BGH’s shares
traded on the SET during the period before the price determination plus
premium and 2) allocation of up to 474.7 million shares (General Mandate);
2.1) up to 232.4 million shares will be offered on a public offering basis and
2.2) up to 232.4 million shares will be offered on a private placement basis.
The allocation of the newly issued ordinary shares in 2.1) or 2.2) or both shall
not exceed 1.5% of the paid-up registered capital or totaling not exceed
232.4 million shares.
- Get ready for future acquisition
The convertible bond issuance of not exceeding B10bn is a source of low-rate
loan for BGH. In case that convertible bonds are exercised, the conversion
price will be higher than the market price. The dilution effect from all
conversion is low at only 3.33%, while the dilution effect from the General
Mandate of up to 232.4 million shares is not over 1.43%. In addition, looking
back, General Mandate was usually used for a share swap between BGH and
the companies BGH had acquired. At present, BGH has planned to possess 50
hospitals in total by the end of next year; 34 hospitals are currently providing
services (including three newly acquired hospitals from Sanamchan Hospital
group), nine hospitals are ready to open or under a construction process,
totaling 43 hospitals, and seven other acquisition deals remain unveiled. The
fund raising through the convertible bond issuance and the General Mandate
would support the purchase or acquisition of the seven new hospitals to
enlarge BGH’s income and profit base in the long run.
- Buy on weakness
The current share price provides only 8.7% upside from 2014 fair value, DCF,
of B17.5, while there is a panic sale from the capital increase news. We
recommend buying when the price weakens.