Bangkok Chain Hospital

Bangkok Chain Hospital Plc (BCH) 

 

We expect BCH to report 4Q15 net profit at Bt157mn, up 9% and 9% QoQ. This will break the traditional earnings pattern of a drop QoQ – a nice surprise - implying earnings upside. The fuel for this comes from lower losses at World Medical Center (WMC) and stronger operations at existing hospitals. BCH’s shares price dropped by 8% yesterday – despite the stronger earnings outlook – giving an opportunity to buy. We maintain BUY on BCH with end-2016 TP at Bt10/share.  

 

4Q15F: Highest of 2015. We expect BCH to report net profit of Bt157mn, up 9% YoY and 9% YoY, the highest quarter of 2015. This beats our earlier expectation of Bt127mn, down 12% YoY and 12% QoQ, and comes from lower losses at WMC, its high-end hospital, and stronger operations at existing hospitals. It if meets our new 4Q15F, 2015 net profit will come to Bt494mn, -5% YoY but 6% better than our current 2015 forecast.  

 

WMC operations stronger than expected. We expect WMC to contribute a net loss of Bt40mn in 4Q15, beating our previous estimate of a Bt60mn loss and better than the ~Bt57mn loss in 3Q15, backed by better operations. BCH reports that WMC is serving more international patients, particularly from Oman, with which it has a contract to refer patients from Oman to WMC, and China, with which it has arrangements with agencies to bring Chinese tourists for health checkups. In 4Q15, we estimate WMC’s average visits at 170/day and average inpatient traffic at 22 beds/day, up 7% from 9M15. We estimate revenue per patient at ~Bt3,400 for OPD and ~Bt20,500/day for IPD, a 10% increase from 9M15 due to rising international patients. In 2015, WMC’s loss will be Bt230mn, below our current 2015 forecast of Bt250mn loss. 

 

Expansion will focus on its expertise. BCH’s expansion in 2016-18 is on track and it is focusing on mid- to low-income earners, its main area of expertise. In 1Q16, BCH will open a new OPD building at Kasemrad Sriburin, Chiang Rai to serve cash patients and the existing building will be dedicated to social security patients. In 1Q17, BCH will upgrade Kasemrad Sriburin Poly Clinic at Maesai, Chiang Rai to a 30-bed hospital. In 2018, it will open Kasemrad Ramkhamhaeng with 144 beds in January and Kasemrad Chiang Khong Hospital with 30 beds. Since these investments are small and are aimed at a market in which BCH has long years of experience, we do not expect a huge earnings drag as there was from WMC. 

 

Share price drop is an opportunity to buy. Yesterday, BCH’s share dropped 8%, hitting a 2-month low. We view the contraction as overdone and see this as an opportunity to buy for the better earnings in 4Q15 and strong earnings bounce in 2016 after three years of contractions, as WMC comes closer to breaking even. BCH is trading at 1.4x 2016PE to earnings growth, below the regional average of 2.0x. We maintain BUY on BCH with end-2016 TP at Bt10/share.