Bangkok Dusit Medical

Bangkok Dusit Medical Plc (BGH)  

- 4Q14 normalized profit to grow 23.4%yoy   

 

BGH's total revenue is projected to grow 14%yoy in 4Q14. Revenue growth from the hospital business is expected to meet the target of 13%yoy in 4Q14, 8%yoy from existing hospitals and 5%yoy from ten new hospitals opened in 2014. Revenue from Thai patients is projected to rise by 14%yoy in 4Q14, mainly from new hospitals, while revenue from international patients is expected to grow by 13%yoy, improving significantly since November 2014 (up 14%yoy in November and 17%yoy in December). In addition, BGH has been controlling its cost and expenses strictly, so 4Q14 EBITDA margin is projected to increase by over 100 bps from 4Q13. On the contrary, impairment loss in 4Q14 would be B100m higher than 4Q13 since more new hospitals have been opened this year, and funding cost is projected to increase by B40m from 4Q13 as a result of B10bn convertible bonds issuance. Overall, BGH's 4Q14 net profit is estimated at B1,750m (rising 23.4%yoy but decreasing 9.2%qoq due to seasonal effect). Accordingly, FY2014 normalized profit are projected near our forecast of B7,163m. 

 

- Normalized profit to grow steadily 15% p.a.   

 

BGH targets revenue growth of 13%yoy in 2015, 10%yoy from existing hospitals and 3%yoy from new hospitals. BGH has total 39 hospitals at the end of 2014 and has planned to open two new hospitals within mid-2015: Dibuk Phuket (to be opened in 1Q15, focusing on middle-low incomers), and Samitivej Chonburi. EBITDA margin is targeted at 22-23% (close to 2014’s) and net margin is expected to stay unchanged. Despite improving profitability and strict expense control, they would be negated by many new hospitals that would not make a breakeven in 2015, but likely to start generating profit and boosting BGH's EBITDA margin in 2016. We conservatively estimate FY2015 profit growth at 13%, same rate as revenue growth. BGH plans to possess 50 hospitals in total by the end of 2015; including two new hospitals opening in 2016, it currently has 43 hospitals under operation. Accordingly, we believe BGH will have to acquire seven more hospitals to enlarge its profit base in the long run. 

 

- Upside from new deals. Buy