FRIDAY, March 29, 2024
nationthailand

Bangkok Chain Hospital

Bangkok Chain Hospital

Moving into Premier League Outperform - N/A Share Price: Bt9.00 Target price: Bt12.00

Bangkok Chain Hospital Plc (KH)

We believe M&As will continue to lift the sector in the next few years. Bangkok Chain Hospital (KH) can either be an acquirer or a target. The group’s new WMC will enhance its attraction as a target, while financial strength should allow it to look around for targets as well. Apart from that, KH’s organic growth is expected to be 20% p.a. over the next three years. We initiate coverage with OUTPERFORM and a THB12 target price, based on 13.4x CY13 EV/EBITDA, 2 SD above its 3-year average. This implies an almost 20% discount to peers.
Low-to-mid-end leadership
KH has 936 active beds and 232 outpatient clinics which can serve 9,280 outpatients a day. It has about a 5% market share of private-hospital beds in Greater Bangkok and 3% nationwide.
KH started moving up the value chain in 2010 when it stopped taking patients under the government’s Universal Healthcare Scheme.
However, it continues to service Social Security Scheme (SSS) patients. With the introduction of a Diagnosis-related Group (DRG) payment scheme and centralised funds for serious cases last year, we believe KH will get more patients referred from network hospitals without the need to worry about the responsibility for higher medical-treatment costs.
Moving higher end with WMC brand
KH will be opening a new 300-bed World Medical Centre in Bangkok in Oct 12. This will account for 30% of its capacity. We expect the new hospital to take 2-3 years to break even, which is typical. Bottom-line contributions are expected after 2014. KH also plans to build another WMC hospital in Pattaya and a Kasemrad Hospital in Ramkhamhaeng Bangkok next year.
OUTPERFORM
KH has been re-rated along with its healthcare peers in recent days, but we believe its valuations are still not too excessive against peers, at 10.2x CY13 EV/EBITDA vs. peers’ 15.7-15.8x. 
 

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