Bangkok Dusit Medical

Bangkok Dusit Medical Plc (BDMS)

 

- 2Q15 profit to grow only 2.3% yoy 

We project gross revenues of BDMS, from both a hospital business and a medical supplies and equipment production and distribution business, to grow 12%yoy in 2Q15. Revenues from hospitals, the core business, would increase 11%yoy; revenues from existing hospitals would rise only 5%yoy because revenues at its medium to low-end hospitals, Paolo, could grow only 3%yoy as a result of the economic slowdown while revenues at provincial hospitals in tourist attraction areas would decrease due to lower tourist volume, especially from Russia, Europe, and Australia, while the rest 6%yoy growth would come from new hospitals opened in 2Q15, which increased the total number of BDMS’s new hospitals from two to 13. However, eight out of the 13 new hospitals would face loss in EBITDA, possibly depressing gross profit margin from 31.8% to 31.0% in this quarter. In addition, depreciation cost is projected to rise 20.7%yoy to B1,050m and 2Q15 effective tax rate of 23% is higher than usual. Consequently, 2Q15 net profit is estimated at B1,536m, growing 2.3% from the same period last year. 

- Maintain 2015 forecast. High season is a boost in 2H15 

A similar growth is foreseen in 3Q15. Revenues from existing hospitals would increase around 5-6% in July 2015. BDMS is still focusing on patients from the Middle East, China, and neighboring countries (the number of Middle Eastern patients has decreased in the first half of July 2015 as a result of Ramadan period during June 16 – July 15). However, a better growth would be seen in the rest of 3Q15; the number of Middle Eastern patients would increase as it is a summer holiday for countries in the Middle East, while the number of Thai patients would also increase significantly from usual diseases in late rainy season and early winter season, e.g. common cold and hemorrhagic fever. Accordingly, BDMS’s profit would grow yoy again since 3Q15 onwards. Moreover, 4Q15 is a tourism season, so revenues growth would come mainly from foreign patients. Overall, we maintain our forecast, estimating FY2015 net profit at B8,056m or a growth of 9%yoy and normalized profit growth at 13.5%yoy. 

- Upside not attractive. Hold and wait for future acquisition 

2015 fair value, DCF, is B21, which implies only 6.1% upside. Yet, there can be added value from future business acquisition. We reiterate HOLD.