THURSDAY, March 28, 2024
nationthailand

Bangkok Chain Hospital

Bangkok Chain Hospital

Windfall from change in SSS OUTPERFORM - Maintained Share Price: Bt9.35 Target price: Bt12.60

Bangkok Chain Hospital Plc (BCH)

BCH is the prime beneficiary of a change in payment method in the Social Security Scheme. This will support its earnings growth over the next few years while revenue from international patients will start to rise when the World Medical Centre (WMC) gets up and running. We adjust our earnings forecasts by -1% to 4% for CY12-14 due to the delay in the opening of WMC. We reiterate our Outperform call and roll over our target price to THB12.6 for end-CY13, based on 12.6x CY14 EV/EBITDA, which is +1.5SD from its 3-year historical average. Our previous target price was THB12, based on 13.4x CY13 EV/EBITDA. 

SSS revenue gaining momentum
Revenue from SSS jumped 27% yoy in 1H12, following just 1% growth in both 2010 and 2011, due to changes in the payment method. Although this is not a big surprise to us, the market
may not fully appreciate it yet. We expect revenue from SSS to grow more than 20% p.a. over the next few years. In addition, most of the increases in SSS revenue would come from more serious cases, which will boost BCH’s margins, as already evident.

International patient revenue
will be next With the launch of high-end WMC in mid-December, we believe BCH will rake in more revenue from international patients, who normally have higher illness intensity than their Thai counterparts. This will help boost BCH’s margins. BCH’s international patient revenue
now forms only 2-3% of its revenue. Thus, there is a lot more room to grow.

Reiterate Outperform
We continue to like BCH for its defensive business model and decent earnings outlook. Inorganic growth could add more colour to the stock.We reiterate our Outperform call and roll over our target price to THB12.6, now based on 12.6x CY14 EV/EBITDA (implying 13.8x CY13 EV/EBITDA), which is +1.5SD from its 3-year historical average. Our previous target price was THB12, based on 13.4x CY13 EV/EBITDA,2SD above its 3-year historical average.

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