Bumrungrad Hospital

Bumrungrad Hospital Plc (BH)

In line with all estimates
BH announced a net profit of Bt613m for 1Q13, up by 6% YoY and 51% QoQ. Stripping out a Bt12m FX gain, core earnings would have been Bt601m, up by 5% YoY and 49% QoQ. The result was in line with our estimate and the consensus. 
Results highlights
On a YoY basis, earnings growth was led by 10% healthcare revenue expansion to a record of Bt3.5bn. The impressive 1Q13 top-line was driven by growth of 13.8% YoY in OPD income and 4.7% in IPD receipts (note that a high YoY base was set by exceptionally high post-flooding patient numbers in 1Q12). OPD was the key driver of both volume (Thai and foreign patients) and pricing. 1Q13 healthcare revenue comprised 62.1% foreign and 37.9% Thai patients. GM was stable at 38% YoY. However, core margin dipped from 18.1% in 1Q12 to 17.4% in 1Q13, due to lower equity income following BH’s sale of its stake in BCH (Bt55m in profit-sharing from BCH in 1Q12 versus none in 1Q13). 
On a QoQ basis, healthcare revenue rose 7% and core margin jumped from 12.5% in 4Q12 to 17.4% in 1Q13 on seasonality. BH posted a net cash position for the third straight quarter (the cleanest balance sheet in its history)—Bt6.7bn on-hand at end-March. 
Outlook
The firm’s 2Q13 earnings will rise YoY, but drop QoQ, due to low season. Note that in March, BH opened 80 new diagnostic rooms (a 38% OPD capacity expansion) on the upper four floors of Bumrungrad International Building.
What’s changed?
1Q13 profit represents 25% of our full-year forecast (26% of the consensus), which we maintain unchanged (17% YoY earnings growth for the year). There could be scope for upside to our long-term forecasts if there were to be a new acquisition and/or news of a clear investment plan (two land plots for expansion on Sukhumvit Soi 1 and on Petchaburi Road).
Recommendation
We maintain Our BUY rating with an unchanged DCF-derived YE13 target price of Bt98. BH has a high FY13 ROE of 26.4% versus a 17.6% global mean. However, its valuation multiples lag those of readily comparable counters—an FY13 PER of 26.6x against 36.3x for BGH and a 30.0x global mean.