Bangkok Dusit Medical
Healthcare sector's top pick
Bangkok Dusit Medical Plc (BGH)
- To prosper in 4Q14. FY2015 profit to grow at least 13-14%
BGH's executive projected 4Q14 revenue to grow at a faster pace than 6.7%yoy in
3Q14 and 9.3%yoy in 9M14. Revenue has jumped by 11%yoy since the beginning of
October. 4Q14 revenue is expected to grow by 11%yoy because revenue from
international patient has rebounded and patient volume increased in October due to
few months delay of the rainy season. Moreover, revenue from Paolo Hospital has got
back to normal in 4Q14 after in 3Q14 there was reversal of B40-50m excess revenue
the hospital overbooked from the social welfare project, retroactive from 2013 on
(revenue intensity was initially set at B15,000/RW, but only B10,5000/RW was
actually received because the social welfare policy does not cover some diseases).
FY2015 revenue is projected to grow by 13-14%, 10% from existing hospitals and 3-
4% from new hospitals. BGH has been controlling its expense strictly while improving
its efficiency, targeting its EBITDA margin at 22-23%.
- Normalize profit to grow 17% in 2014, 13% in 2015
9M14 normalized profit grew by only 14.9%, while revenue growth has rebounded by
over 10%yoy in 4Q14. Normalized profit is estimated to grow by 17% in 2014 (as
expected), likely to grow by over 13% (beyond projection) in 2015 if BGH can control
its expense efficiently and raise its EBITDA margin. However, higher expense from
opening of new hospitals (Bangkok Khonkaen Hospital, Royal Phnom Penh Hospital,
and Bangkok Hospital China Town will be opened at the end of 2014, and Sri-Rayong
Hospital and Dibuk Hospital will be opened in 1Q15.) would make it harder for BGH to
increase its EBITDA margin. Overall, we maintain FY2015 earnings forecast.
- Steady growth. BUY
FY2015 fair value (DCF) of B21 implies 16.7% upside. There is also additional value
from acquisition deals in the future. BGH has planned to possess 50 hospitals in total
by the end of 2015 (37 of which is currently operating, and another six is already
scheduled to be opened). We recommend BUY; BGH is the sector's top pick.
