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Friday, 14 November 2014

HOLD
(Maintained)

COMPANY UPDATE

Bumrungrad Hospital (BH TB)

Good News Priced In
With the easing of politics, international patients have started to return to BH faster
than expected. The trend is expected to continue and gather momentum next year.
Coupled with expanded capacity and good operating margins, BHs earnings growth
should reach 22% next year. However, most of the good news has been priced in.
Maintain HOLD. Target price: Bt140.00. Entry price: Bt120.00.
WHATS NEW
International patients have returned. After suffering from declining international patient
volumes as a result of political conflicts in 1H14, Bumrungrad Hospitals (BH) international
patient volume has started coming back in 3Q14. This followed the easing political
situation in Thailand after the military coup in May. In 3Q14, international patient volume
increased 3% after a negative growth in the last two quarters. As we expect the political
situation in Thailand to remain calm in the foreseeable future, we expect international
patient volume to continue to improve. Leading the comeback are international patients
from the Middle East. We therefore expect another good set of results in 4Q14 and into
2015. Initially, it seems the martial law was a major obstacle to the return of international
patients. But the rising international patients at BH suggest they are ignoring the martial
law and contine to seek treatment at BH. The return of international patients is crucial to
BHs overall performance as international revenue accounted for over 60% of its total
revenue in the past two years. The revenue proportion from international patients was
restored back to 61% in 9M14.
Sufficient capacity at Sukhumvit campus until mid-18. After opening five floors in
Bumrungrad International Clinic for outpatients in May l3, BH has just added 18 ICU beds
and 58 ward beds, raising its licensed bed capacity to 580. At the moment, BH plans to
develop a nearby building, Bumrungrad Tower (BH Residence). The company is
studying whether to renovate the building for hospital usage or to house its back-office
staff to reducing rental cost. Renovations may take one year. With all these
developments, it will esnsure sufficient capacity at the Sukhumvit campus to service both
Thai and international patients until mid-18 when the new hospital on New Pethburi Road
will open for services.

Share Price
Target Price
Upside

Bt135.00
Bt140.00
+3.7%

COMPANY DESCRIPTION
One of the country's largest private hospitals
in Bangkok with JCI accreditation and caters
to both foreign and local patients.

STOCK DATA
GICS sector
Bloomberg ticker:
Shares issued (m):
Market cap (Btm):
Market cap (US$m):
3-mth avg daily t'over (US$m):

Health Care
BH TB
728.6
98,361.1
2,997.9
2.8

Price Performance (%)

52-week high/low

1mth

Bt142.50/Bt82.00

3mth

6mth

1yr

YTD

0.7

32.4

48.8

53.8

5.5

Major Shareholders

Sophonpanich family

30.7

Bangkok Dusit Medical Services

24.0

UOB Kay Hian (Hong Kong)

8.4

FY14 NAV/Share (Bt)

14.90

FY14 Net Cash/Share (Bt)

0.66

PRICE CHART
BUMRUNGRAD HOSPITAL PUB CO

(lcy)
BUMRUNGRAD HOSPITAL PUB CO/SET INDEX

160

(%)

170
160
150

140

140
130

120

120

KEY FINANCIALS
Year to 31 Dec (Btm)
Net turnover
EBITDA
Operating profit
Net profit (rep./act.)
Net profit (adj.)
EPS (Bt)
PE (x)
P/B (x)
EV/EBITDA (x)
Dividend yield (%)
Net margin (%)
Net debt/(cash) to equity (%)
Interest cover (x)
ROE (%)
Consensus net profit
UOBKH/Consensus (x)

110

100

100

2012
12,982
3,160
2,445
2,558
1,698
2.3
57.9
11.6
31.0
1.3
19.7
(8.2)
13.2
33.6
-

2013
14,346
3,871
2,983
2,521
2,370
3.3
41.5
10.2
25.3
1.4
17.6
(4.0)
15.8
27.8
-

2014F
15,484
4,232
3,210
2,679
2,625
3.6
37.5
9.1
23.1
1.5
17.3
(4.4)
22.9
26.2
2,739
0.96

2015F
17,913
4,999
3,905
3,254
3,200
4.4
30.7
7.8
19.6
1.7
18.2
(12.3)
27.1
27.7
3,228
0.99

2016F
20,306
5,749
4,522
3,749
3,695
5.1
26.6
7.0
17.0
1.9
18.5
(13.4)
31.2
30.0
3,722
0.99

90

80
30
20

Volume (m)

10
0

Nov 13

Jan 14

Mar 14

May 14

Jul 14

Sep 14

Nov 14

Source: Bloomberg

ANALYST
Kowit Pongwinyoo
+662 659 8304
kowit.p@uobkayhian.co.th

Source: Bumrungrad Hospital, Bloomberg, UOB Kay Hian

Refer to last page for important disclosures.

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New hospital on new Petchburi Road to be completed in mid-18. For BHs newly
planned hospital on New Petchburi Road (near to the existing one), the company
expects to complete the EIA, the approval of 19.2% more usable area and the
construction permission by Aug 15. Construction is expected to commence in Sep 15
with completion slated at mid-17. With more usable areas, BH could allocate more
facilities there and may prepare to equip the hospital with 200 beds instead of 150 as
earlier planned. Construction cost has not yet been finalised but may be in the region of
Bt7b.

PROPORTION OF REVENUE
100%
41%

39%

39%

39%

59%

61%

61%

61%

2011

2012

2013

9M14

50%

0%

STOCK IMPACT
EBITDA margins to continue growing. Due to the sudden increase of both Thai and
international patients during the peak season in 3Q14 while operating costs have not
yet caught up with the rising volume, BH experienced an excellent 3Q14 EBITDA
margin of 30%, the hospitals highest so far, and reaching 28% in 9M14 (9M13: 27%).
As we expect operating costs to soon catch up with the rising volume in the following
quarters, margins may come down. We therefore expect EBITDA margin at 27% for
2014 (the same as in 2013) and 28% next year when BH treats more intensity-case
patients following the return of international patients.

International

Thai

Source: BH

SALES AND INTERNATIONAL PATIENTS

(Btm)

(Person)

20,000

600,000
500,000

15,000

400,000

10,000

Expect strong earnings growth of 22% next year. As the return of international
patients just happened in 2H14 and the trend is expected to continue in 2015 with the
expanded capacity in place, we expect BHs 2014 sales to grow only 8% yoy to Bt15.5b.
Sales could grow by a strong 16% yoy to Bt17.9b in 2015 on rising patient volume and
increased capacity. With good margins from intensity cases and effective cost control,
we expect 2014 and 2015 net profit to increase 11% yoy and 22% yoy to Bt2.6b and
Bt3.2b respectively.

300,000
200,000

5,000

100,000

2010
2011
2012
Internationalpatients

2013
Sales

Source: BH

SALES AND EARNINGS GROWTH

(Btm)

EARNINGS REVISION/RISK

(%)

20,000

45

18,000

None.

40

40

16,000

35

14,000
22

12,000

VALUATION/RECOMMENDATION

30
25

10,000

Maintain HOLD. Although we expect BH to report reasonable growth this year and a
strong growth next year on the return of international patients, share price has factored
in the good news. At the current price, BH offers only a 4% upside to our target price of
Bt140.00, based on DCF model at a discount rate of 7%. Entry price is Bt120.00.

8,000

20

11

16

6,000
4,000

15
10

11

2,000

2011
Sales

2012
Core profit

SHARE PRICE CATALYST

Source: BH,UOB Kay Hian

The lifting of the martial law.

P/B AND SD

2013

2014F
Sales growth

2015F
Core profit growth

PEER COMPARISON

Company
Bangkok Dusit
Bumrungrad
Bangkok Chain
Raffles Medical
IHH Healthcare
KPJ Healthcare
Ramsay
Apollo
Local aver.
Total aver.

STOCK
Code

PE (x)
2015F

P/B
(x)
2015F

BGH TB
BH TB
BCH TB
RFMD SP
IHH MK
KPJ MK
RHC AU
APHS IN

31.30
30.34
21.45
27.90
39.88
28.06
27.06
40.51
31.05
32.95

5.62
7.83
4.59
3.80
1.97
3.03
5.91
4.84
6.19
4.54

EV/EBITDA
(x)
2015F

Div Yield
(%)
2015F

ROE
(%)
2015F

Core
Earnings
Growth (%)
2015F

21.63
19.68
13.73
20.71
48.25
15.17
11.81
20.64
21.13
26.62

1.60
1.65
2.33
1.43
0.47
1.69
1.91
0.59
1.61
1.28

18.19
27.74
20.02
14.25
4.93
10.46
21.58
12.29
20.66
15.03

24.79
21.45
39.61
12.20
22.92
16.81
19.55
12.03
23.94
21.30

Source: Bloomberg, UOB Kay Hian

Source: Bloomberg, UOB Kay Hian

Refer to last page for important disclosures.

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PROFIT & LOSS

Year to 31 Dec (Btm)
Net turnover
EBITDA
Deprec. & amort.
EBIT
Total other non-operating income

Friday, 14 November 2014

BALANCE SHEET
2013

2014F

2015F

2016F

Year to 31 Dec (Btm)

14,346

15,484

17,913

20,306

3,871

4,232

4,999

5,749

Other LT assets

888

1,022

1,094

1,227

Cash/ST investment

2,983

3,210

3,905

4,522

Other current assets

251

256

279

282

Fixed assets

Total assets

2014F

2015F

2016F

9,096

9,913

10,605

11,876

604

1,075

1,052

960

5,857

5,640

8,217

6,124

1,695

1,700

1,958

2,212

17,252

18,329

21,831

21,172

329

11

1,511

561

Net interest income/(expense)

(245)

(185)

(185)

(185)

Other current liabilities

1,796

1,921

2,165

2,406

Pre-tax profit

2,995

3,281

3,999

4,619

LT debt

5,143

5,149

5,155

3,661

Tax

(625)

(656)

(800)

(924)

Other LT liabilities

387

391

395

399

9,597

10,857

12,605

14,145

17,252

18,329

21,831

21,172

2013

2014F

2015F

2016F

Associate contributions

ST debt

2013

Minorities

Net profit

2,521

2,679

3,254

3,749

Minority interest

Net profit (adj.)

2,370

2,625

3,200

3,695

Total liabilities & equity

2013

2014F

2015F

2016F

Year to 31 Dec (%)

Operating

3,135

2,949

3,634

4,482

Profitability

Pre-tax profit

3,140

3,335

4,053

4,673

EBITDA margin

27.0

27.3

27.9

28.3

Tax

(625)

(656)

(800)

(924)

Pre-tax margin

20.9

21.2

22.3

22.7

888

1,022

1,094

1,227

Net margin

17.6

17.3

18.2

18.5

ROA

15.2

15.1

16.2

19.0

Working capital changes

(117)

(698)

(660)

(440)

ROE

27.8

26.2

27.7

30.0

Non-cash items

(157)

(54)

(54)

(54)

CASH FLOW
Year to 31 Dec (Btm)

Deprec. & amort.

Associates

Other operating cashflows

Shareholders' equity

KEY METRICS

Investing

(2,119)

(1,789)

(1,094)

(1,958)

Turnover

10.5

7.9

15.7

13.4

Capex (growth)

(2,119)

(1,789)

(1,094)

(1,958)

EBITDA

22.5

9.3

18.1

15.0

n.a.

n.a.

n.a.

n.a.

Pre-tax profit

19.9

9.6

21.9

15.5

Financing

(1,193)

(1,377)

36

(4,617)

Net profit

(1.4)

6.3

21.4

15.2

Dividend payments

(1,387)

(1,387)

(1,473)

(1,627)

Net profit (adj.)

39.6

10.8

21.9

15.5

(550)

EPS

39.5

10.8

21.9

15.5

194

10

1,510

Loan repayment

(2,440)

Others/interest paid

Debt to total capital

36.3

32.2

34.6

23.0

Net cash inflow (outflow)

(177)

(217)

2,577

(2,092)

Debt to equity

57.0

47.5

52.9

29.9

Beginning cash & cash equivalent

6,034

5,857

5,640

8,217

Net debt/(cash) to equity

(4.0)

(4.4)

(12.3)

(13.4)

Ending cash & cash equivalent

5,857

5,640

8,217

6,124

Interest cover (x)

15.8

22.9

27.1

31.2

Proceeds from sale of assets

Issue of shares
Proceeds from borrowings

Refer to last page for important disclosures.

Growth

Leverage

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Disclosures/Disclaimers
This report is prepared and/or distributed by UOB Kay Hian Pte Ltd (UOBKH), which is a holder of a capital markets services licence and
an exempt financial adviser in Singapore.
This report is provided for information only and is not an offer or a solicitation to deal in securities or to enter into any legal relations, nor an
advice or a recommendation with respect to such securities.
This report is prepared for general circulation. It does not have regard to the specific investment objectives, financial situation and the
particular needs of any recipient hereof. Advice should be sought from a financial adviser regarding the suitability of the investment
product, taking into account the specific investment objectives, financial situation or particular needs of any person in receipt of the
recommendation, before the person makes a commitment to purchase the investment product.
This report is confidential. This report may not be published, circulated, reproduced or distributed in whole or in part by any recipient of this
report to any other person without the prior written consent of UOBKH. This report is not intended for distribution, publication to or use by
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The information or views in the report (Information) has been obtained or derived from sources believed by UOBKH to be reliable.
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not receive any compensation that is directly or indirectly related or linked to the recommendations or views expressed in this report or to
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Refer to last page for important disclosures.

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receive this document by way of distribution from or which they regard as being from UOBKH by their acceptance thereof represent and
agree that they are a major institutional investor and understand the risks involved in executing transactions in securities.
Any U.S. recipient of this research report wishing to effect any transaction to buy or sell securities or related financial instruments based on
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Subject Business involving any of the subject corporation(s) or securities referred to in this report; and (4) he/she has not received and will
not receive any compensation that is directly or indirectly related or linked to the recommendations or views expressed in this report or to
any sales, trading, dealing or corporate finance advisory services or transaction in respect of the securities in this report. However, the
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Copyright 2014, UOB Kay Hian Pte Ltd. All rights reserved.
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Refer to last page for important disclosures.

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