Bangkok Dusit Medical
We revise up BGH's earnings forecast to reflect efficiency improvement of cost control. New fair value of B19 implies a limited upside. However, added value from acquisition plans of seven additional hospitals has not been included in our forecast yet
Bangkok Dusit Medical Plc (BGH)
- 2Q14 normalized profit grows 24%yoy, better than expected
2Q14 net profit was reported at B1,501m, rising 11.4%yoy. Excluding
B131m extraordinary gain on fair value adjustment of investment in 2Q13,
2Q14 normalized grew by 23.5%yoy (better than expected). 2Q14 total
income increased by only 9.4%yoy; income from Thai and international
patients grew by 10%yoy and 8%yoy, respectively. However, owing to
efficiency improvement of cost control, BGH's gross profit margin rose from
31.5% in 2Q13 to 31.8% in 2Q14, and SG&A/Sales decreased from 15.9%
in 2Q13 to 14.7% in 2Q14.
- 2H14 profit to increase from 1H14
1H14 net profit made up 53% of FY2014 earnings forecast. BGH sets
FY2014 total income growth target at13%yoy. 2H14 net profit is projected
to improve from 1H14, especially in 3Q14 (high season), thanks to better
control on expense. In addition, BGH would regain confidence from
international patients after the political tension receded, and Thai patient
volume would increase as the economy recover. Profit from Sanamchan
Hospital group would be included from August 15 on, but it would be
partially negated by loss at the beginning of acquisition of seven new
hospitals in 2H14. We revise up BGH's FY2014-2015 earnings forecast by
5.2%p.a.; normalized profit is expected to grow by 17.7%yoy to B7,163m
in 2014, then jump by 13%yoy in 2015. At present, BGH has planned to
possess 50 hospitals in total by the end of 2015; 34 hospitals are currently
providing services, nine hospitals are ready to open or under a construction
process, totaling 43 hospitals, and seven other acquisition deals remain
unveiled. BGH is expected to purchase or acquire seven new hospitals to
enlarge its income and profit base in the long run.
- Buy when price weakens
Under the new forecast, BGH's fair value is revised up from B17.5 to B19,
implying a limited upside. However, there would be added value from BGH's
future acquisition plans. We might derive FY2015 fair value after 3Q14
earnings report. We reiterate BUY when the price weakens.
