Bumrungrad Hospital

Bumrungrad Hospital Plc (BH)

Service capacity to increase since 2Q13 after outpatient service expansion

At the end of this month, BH will open additional services at 5 stories of the
outpatient building of Bumrungrad International Hospital after getting an approval
from the Ministry of Public Health and Bangkok Metropolitan Administration. The
additional services include 80 more outpatient examination rooms (from currently
212 rooms), which will increase the outpatient service capacity by 30%.
Moreover, BH is also preparing to increase the service capacity for inpatients. In
the middle of this year, BH will add 21 more inpatient beds (from currently 487
beds) to the 12th floor of the inpatient building in the area that has finished the
renovation work (around 50% of the total area) and it will add 40 more beds to
the rest 50% of the area subsequently by the beginning of 2014. Moreover, BH
will increase the number of ICU beds on the 4th floor of the inpatient building
from 55 at present to 85 or 30 more beds after the renovation finishes by this
year and 20 more beds next year, in order to solve the problem of limited service
capacity during the peak period of the day and the peak season (3Q). With the
increasing capacity, the patient volume of BH would be rising gradually since
2Q13 onward and thus push up the profit growth in 2Q13 to be better than 1Q13.
Accordingly, the norm profit is projected to show high growth again since 3Q13;
apart from the above-mentioned positive factors, it is also a high season and BH
stopped booking share of profit from BCH since 3Q12. Consequently, we are
bullish that the norm profit in 2013 would grow 13.9% from the same period last
year, with continuous growth of 15% foreseen in 2014 despite 1Q13’s profit
growth of only 5%.
- To have new buildings built to support long-term growth
Moreover, BH is preparing to have 2 new buildings built. The first one is a 7-8
storey building in Nana 1 alley 50 meters away from the hospital, which will be
used as a lab, check up center, and physical medicine & rehabilitation center. The
building is now under a designing process; the construction would start at the end
of this year, and it will start giving service by 2015. The second one is a 28-storey
building on New Petchaburi Rd. to use as a medical center for women and
children (150-200 beds), which is also now under a designing process. However,
as it is a large building with big service areas, it will need to pass an EIA, which
would take considerable time, so the building would start the construction around
mid-2014 and finish and is ready to give services in 2017. All these plans will be
able to support the long-term growth of BH from increasing patient volume after
the AEC liberalization. In addition, BH is now seeking locations and conducting a
feasibility study for acquisition of other hospitals in Bangkok to step up as the 2nd
brand of middle-level hospitals to expand the income base; this issue, however,
has still not been included in our forecast.
- Laggard stock. Upside is 17.2%. Reiterate “Buy”
The profit growth tends to improve gradually since 2Q13 onward and the
company will be engaging in aggressive service capacity increase since 2013.
Moreover, BH is substantially underperforming the sector, so it is considered as a
laggard stock. We therefore reiterate our BUY recommendation. 2013’s fair value,
using DCF, is B102/share, implying 17.2% upside. Switch from BGH to BH.
Bumrungrad Hospital Plc (BH)