Bangkok Chain Hospital
Healthy performance OUTPERFORM - Maintained Share price: Bt9.00 Target price: Bt12.00
Bangkok Chain Hospital Plc (KH)
KH remains in the pink of health with anticipated organic growth of 20% p.a. over the next three years. 2Q12 results met our forecast and beat consensus by 4% as strong margins along with decent revenue growth continued to drive its earnings. Its 1H12 net profit came in at 49% of our full-year number. With a reasonably-sized network, KH can be either a takeover target or an acquirer. We reiterate our Outperform call and continue to value the stock at 13.4x CY13 EV/EBITDA, 2SD above its 3-year average. This implies a discount of almost 15% to local peers.
Improving margin
KH, which will be renamed BCH soon,reported THB220m net profit in 2Q12,up 26% yoy but down 2% due to seasonality. Its gross margin improved from 43.8% in 2Q11 and 44.2% in 1Q12 to 44.3% in 2Q12.
SG&A was under control at 10.3% of revenues in 2Q12 vs. 11.4% in 2Q11 and 9.4% in 1Q12.
KH also announced a 1H12 DPS of THB0.15. The stock will go ex of the dividend on 23 Aug and the dividend will be paid on 6 Sep.M&A still the key theme for the sector.
KH will open a new 300-bed hospital, World Medical Centre, in Oct 2012, adding to its existing network of six hospitals housing 936 active beds.
With a low net gearing of 39%, it has the financial muscle and scale to acquire others.
However, KH is also an attractive takeover target as it is trading at only 10x CY13 EV/EBITDA compared to over 15x for domestic peers. We think that it deserves to be re-rated.
Reiterate Outperform
KH has been rerated along with its healthcare peers in recent days. However, we believe that it remains cheap at 10.1x CY13 EV/EBITDA vs. local peers’ 15.6x.
