Bangkok Dusit Medical Services

Bangkok Dusit Medical Services Plc (BGH)

Record core earnings. Net profit was Bt2.0bn, up 58% YoY and 55% QoQ, beating SCBS
and market consensus by 13% on higher-than-expected equity income from extra
items for BH and RAM and lower-than-expected taxes. Excluding the Bt300mn extra
items through equity gives a record core profit of Bt1.7bn, up 34% YoY and 33% QoQ.
9M12 net profit accounted for 82% of our 2012F. We are likely to raise earnings and at
the same time will move valuation base to end-2013 from mid-2013 after the
November 16 analyst meeting. BGH is our top pick with sound fundamentals and
strong earnings growth prospects. We maintain BUY.
Highlights:
Healthy revenues. Hospital operating revenue was Bt12bn, up 15% YoY and 12%
QoQ. By nationality, revenue from Thai patients rose 15% YoY and international
patients grew 17% YoY. OPD revenue grew by 13% YoY and IPD by 18% YoY.
Improved EBITDA margin. EBITDA margin was 25.1%, down from 26.3% in 3Q11
but up from 23.4% in 2Q12. The YoY decline was due to higher staff expenses
brought by the rise in minimum wage and staff recruitment. QoQ improved as the
magnitude of the rise in expenses was lower and revenue growth strong.
Huge equity income. BGH’s equity income was Bt562mn in 3Q12, up from
Bt107mn in 3Q11 and Bt206mn in 2Q12. This came from Bt300mn in extra items
consisting of: 1) Bt159mn from BH (23.9% held by BGH) from the gain on the sale
of its holding in BCH and tax benefit from the sale of BH subsidiary BMC and
2) Bt141mn from RAM (38.24% held by BGH) from gain on a securities swap.
Lower-than-expected tax expense. Effective tax rate fell to 20% in 3Q12. We
believe this arises out of a tax loss carried forward from Bangkok Udon Hospital,
which started operations in September.