Bumrungrad Hospital

Bumrungrad Hospital Plc (BH)

- 1Q14 grows only 4.2% yoy
BH has been affected severely by the political unrest in 1Q14. BH has only one
hospital, and it is located near the protest site. The number of international
patients fell by 12.3%yoy while Thai patient volume rose by 5.9%yoy, thus
lowering the number of inpatients by 1.9%yoy and outpatients by 8.1%yoy.
Revenue intensity from inpatients increased by 3%yoy, but revenue intensity
from outpatients slipped 5.4%yoy. However, BH has increased its medical and
service fee by 5% at the beginning of the year, thus boosting income from
healthcare business by 3.8%yoy in 1Q14. Although operating cost increased at
the same rate as income, 1Q14 interest expense dropped from 1Q13 by B14m.
Overall, BH's 1Q14 net profit was reported at B638m, up 4.2%yoy.
- Political pressure throughout 2014
BH's patient volume has improved after the emergency decree was revoked.
However, BH has only one hospital, and it is located near the protest site.
Moreover, because purchasing power has weakened and the economy has
decelerated as a result of the political turmoil, patients hesitated to get
treatment from high-premium hospitals like Bumrungrad, so its patient volume
is not likely to grow significantly. Conservatively, we maintain BH's FY2014
earnings forecast; FY2014 total income from hospital business is expected to
grow by 6%yoy, mainly from the medical and service fee hike. Overall, we
project FY2014 net profit to grow by only 6.5%.
- Switch to BGH with faster recovery
Share price has surged by 20.7% (YTD), already passed its lowest (in the heat
of the political turmoil). FY2014 fair value of B110 (DCF) implies only 9.5%
upside. Moreover, the political tension has recently escalated, possibly pressing
BH's patient volume again. We downgrade our recommendation from buying to
holding and switching to BGH that possesses a stronger recovery.