Health Care Service

Health Care Service 

 

- Bright future for private hospitals  

Healthcare is another sector that would show continuous and good earnings growth in the long run. Domestic contributions are 1) the proportion of elderly population (aged over 65 years) to total population will rise from 8.9% in 2010 to 12.3% in 2020, 2) the ratio of healthcare spending to GDP of Thailand is only 4.6%, versus 12-13% of developed countries, and 3) the ratio of population per hospital bed (IPD) is as high as 477 people, versus the world average of 385 people/bed. Likewise, the number of foreign patients will increase significantly; as a result of the AEC liberalization, revenues of the population in CLMV (Cambodia, Laos, Myanmar, and Vietnam) will increase, whereas medical technology in those countries is far behind Thailand, so the number of CLMV patients coming for treatment in private hospitals in Thailand will grow continuously every year. Many hospitals have also planned to increase their service capacity to meet with increasing demands in the next three to five years. 

- Averagely 15% growth in long-term for private hospitals  

Earnings of the healthcare sector could grow averagely 15% p.a. in the long run. BH would show the best growth among peers at 37.5%yoy in 2015 because of its low profit base in 2014 and a high growth in the number of foreign patients with high revenue intensity (1H15 profit growth was 43.1%yoy). CHG would show a profit growth of 16.5%yoy in 2015 as its heart disease center has been able to provide service at a full capacity. BDMS’s would underperform peers, with profit growth of only 9%yoy because there is still loss from 11 out of its 13 newly opened hospitals. However, in 2016, CHG would show the biggest growth among peers at 25.1%yoy from its increasing service capacity for in-patients (owing to full-year operation of CH-11 and gradual opening of CH-9 and CH-3 in 2016); BDMS’s profit would grow 17.6%yoy as some new hospitals would be able to revert to profit again (from only two hospitals with profit to six hospitals in 2016); BH’s profit would grow 13.6%yoy because the profit base in 2015 is already high and the expansion plan will be complete in 2017. 

- BDMS is top pick. Upgrade from HOLD to BUY  

Although the sector’s profit may outperform the market, it was substantially reflected in the share price; we maintain UNDERWEIGHT for the sector. However, BDMS([email protected]) still has an upside of 7.1% from 2015 fair value and even 22.4% from 2016 fair value; we upgrade our recommendation from HOLD to BUY and select it as a top pick of the sector. For BH([email protected]) and CHG([email protected]), we reiterate HOLD because the current share prices already exceeded 2015 fair value.