Bangkok Chain Hospital
2Q16: Strong quarter BUY
Bangkok Chain Hospital Plc (BH)
2Q16 net profit was Bt156mn (Bt0.06/share), up 59% YoY and flat QoQ, beating SCBS estimate by 27% but in line with market expectations. The improvement YoY came from stronger revenue and wider EBITDA margin. Importantly, we see the flat growth QoQ as impressive since this breaks the traditional trend of a QoQ seasonal drop; this is expected to reflect lower losses at World Medical Center (WMC), its high-end hospital, and higher revenue from the social security scheme service (SC). 1H16 results accounted for 47% of our full-year forecast vs. its 46% historical average.
2Q16 highlights:
- 2Q16 revenue was Bt1.5bn, up 13% YoY and flat QoQ. The YoY growth was driven by cash service (+11% YoY), largely from better operations at WMC, as well as SC service (+16% YoY), which added more insured persons. The flat revenue QoQ reflects the offset of higher SC revenue (+5% QoQ) to seasonally lower revenue from cash service (-4% QoQ). According to company guidance, in 2Q16, it had an average of ~740K SC insured persons, up 7% YoY and 2% QoQ, from adding insured persons at Kasemrad Sriburin Hospital and Karunvej Rattanatibeth Hospital.
- EBITDA margin was 27.1% in 2Q16, improving from 23.6% in 2Q15 and flat QoQ.
We estimate WMC’s loss at ~Bt30mn, lower than the ~Bt60mn loss in 2Q15 and ~Bt40mn loss in 1Q16, backed by rising revenue and improving operations on greater success in attracting more international patients, a high-yield segment.
- Interest-bearing debt to equity was 0.9x as of June 2016, little changed from March 2016.
Top pick in the sector. BCH announced a dividend of Bt0.07/share, implying 0.6% dividend yield. XD is August 26 and payment September 13, 2016. BCH is our lead in the sector because of its strong earnings turnaround with a 22% CAGR for the next three years (vs. 15% for BDMS and 10% for BH). BUY on BCH with TP at Bt14/share.
