Bumrungrad Hospital

Bumrungrad Hospital (BH)
3Q13 normalized profit to grow 19.4%yoy. Income to grow
as expected. Effective cost reduction policy
BH's patient volume rose qoq due to seasonal effect, but stayed flat yoy
partially due to declining purchasing power from domestic consumer.
However, 3Q13 average income per treatment rose by 11%yoy due to
8%yoy price increase and 3%yoy treatment intensity. Thus, 3Q13 income
from treatment is projected to rise by 11%yoy. Gross margin is likely to rise
from 40.2% in 3Q12 to 41% in 3Q13. Moreover, due to effective cost
reduction policy, 3Q13 SG&A/Sales is projected to fall from 15.8% in 3Q12
to 15.4%. Thus, 3Q13 net profit is projected at B617m, falling 47.7%yoy, as
B664 extraordinary net income from investment selling in affliated BCH was
recognized in 3Q12. Excluding extraordinary items, 3Q13 normalized profit
is projected to grow by 19.4%yoy.
- FY2013 normalized profit to grow 17%, 15% in FY2014
BH's 4Q13 profit is likely to drop from 3Q13 due to seasonal effect.
However, due to common illness in winter, tourism season, as well as 30%
increase in service capacity for outpatients and 5% increase in service
capacity for inpatients, which have been effective since mid-2013, 4Q13
normalized profit is projected to grow vigorously yoy. Moreover, FY2013
normalized profit is projected to rise by 17% (in line with our forecast) and
by 15% in FY2014. BH plans to expand the service capacity to support longterm
growth by two construction projects. The first one is a seven- or eightstorey
building in Soi Nana 1, 50 meter away from the hospital, which will
be used as a laboratory, check-up center and rehabilitation center, taking
two years to complete. The second one is a big building on New Petchaburi
road, which will be used as medical center for women and children, taking
three years to complete. The new buildings would boost BH's capacity to
handle vigorously increasing patients after AEC liberalization. BH is currently
seeking locations and conducting a feasibility study for acquisition of other
hospitals in Bangkok to be the second brand of middle-level hospitals and
expand its income base. This issue has not been included in our forecast.
- Good growth continuously. Best in healt sector. Reiterate "BUY".
BH's profit has been growing nicely, possibly growing throughout FY2013.
Moreover, BH will be boosting service capacity aggressively from 2013 on.
FY2013 fair value (DCF) has 14% upside, and we will derive FY2014 fair
value after 3Q13 earnings report, which is likely to rise by at least 10%. We
reiterate "BUY", as BH is the top pick of the sector