Bangkok Dusit Medical Services
LT plan still focused on enhancing quality BUY
Bangkok Dusit Medical Services Plc (BDMS)
At an analyst meeting, BDMS’ management reiterated its long-term plan of slowing the addition of new hospitals and will sharpen focus on improving quality of care in key hospitals as it positions itself as one of the top hospitals in the region. We maintain BUY on BDMS with TP at Bt27/share.
50 hospitals in 2017. Mr. Prasert Prasarttong-Osoth, M.D., CEO and president, targets a network of 50 hospitals in 2017, cementing its status as the largest hospital network in upper ASEAN. BDMS operates 43 hospitals across the country and is working on two more hospitals - Bangkok Hospital Surat (to open in 2017) and Bangkok Hospital Chiangrai (to open in 2018). The goal of 50 implies it is intending to open five more hospitals, either through greenfield or M&A transactions.
Focus on improving quality of care. With a large network in place, it will slow the addition of hospitals and instead work to enhance quality of care. Through 2018, BDMS is developing nine key hospitals situated in regional hubs into “Centers of Excellence” to serve rising demand for more advanced healthcare in the region. It targets revenue contribution from international patients to increase to 50% from 30% currently. The greater contribution from international patients who fly to Thailand for more advanced medical care will lift EBITDA margin over the long run since this is a high-yield segment. BDMS also plans to set up specialty centers, for example hip and knee replacement, dental care, and infertility centers.
Slightly lower revenue target in 2016. BDMS has lowered its 2016 revenue growth target slightly to 8-10% from 11-12%, which aligns with our estimate. This implies stronger revenue growth in 2H16 vs. +8% YoY in 1H16. The company targets a 2016 EBITDA margin of 22%, stable from 2015, and expects this to gradually improve in 2017 supported by growing operations at Centers of Excellence and lower losses at newer hospitals opened since 2014.
Maintain BUY with TP at Bt27/share. We expect better earnings in 2H16 on better operations as the economy improves and less loss burden from the newer hospitals. BDMS is also a longer-term investment tagging the trend of rising healthcare demand with higher quality of care. We maintain BUY on BDMS with TP at Bt27/share.
