Bangkok Dusit Medical Services

Transcription

1 Thailand Company Guide Version 5 Bloomberg: BDMS TB Reuters: BGH.BK Refer to important disclosures at the end of this report DBS Group Research. Equity 27 Mar 2017 BUY Last Traded Price ( 24 Mar 2017): Bt20.90 (SET : 1,573.51) Price Target 12-mth: Bt24.00 (15% upside) (Prev Bt27.50) Potential Catalyst: n/a Where we differ: We are in line with consensus Analyst Apichaya KETRUTTANABORVORN apichayak@th.dbsvickers.com Price Relative Bt Relative Index Mar-13 Mar-14 Mar-15 Mar-16 Mar-17 (LHS) Relative SET (RHS) Forecasts and Valuation FY Dec (Bt m) 2015A 2016A 2017F 2018F Revenue 60,262 65,237 71,434 77,506 EBITDA 15,362 16,118 17,609 18,875 Pre-tax Profit 10,095 10,694 11,149 11,991 Net Profit 7,917 8,386 8,707 9,396 Net Pft (Pre Ex.) 7,709 8,178 8,707 9,396 Net Pft Gth (Pre-ex) (%) EPS (Bt) EPS Pre Ex. (Bt) EPS Gth Pre Ex (%) Diluted EPS (Bt) Net DPS (Bt) BV Per Share (Bt) PE (X) PE Pre Ex. (X) P/Cash Flow (X) EV/EBITDA (X) Net Div Yield (%) P/Book Value (X) Net Debt/Equity (X) ROAE (%) Earnings Rev (%): (1) (11) (14) Consensus EPS (Bt): Other Broker Recs: B: 20 S: 1 H: 7 Source of all data on this page: Company, DBSVTH, Bloomberg Finance L.P Short-term pain, long-term gain Maintain BUY with a lower TP of Bt24. Although we have a positive view towards (BDMS) huge investment in BDMS wellness clinic, this mega project will incur losses in the first three years, i.e. until Thus, we cut BDMS FY17F/18F earnings by 11%/14%. However, we still believe that its wellness centre should boost its brand equity, organic growth and profitability in the long run, given the growing ranks of health conscious consumers in Thailand and globally. Thus, we keep our BUY call with a lower TP of Bt24.0 Mega investment cycle; long-term value-creation at the expense of margins in the medium term BDMS will invest in new greenfield projects, worth Bt1.6bn, for its international hospital project with a 100 IPD-bed capacity to serve its international patients, especially from Japan, the Middle East, Myanmar, CLMV, England and Bangladesh. This facility will be located in the same area as the current BDMS headquarters. BDMS will relocate its international department which is currently at Wattanosoth Hospital (cancer hospital) to the new building to increase usage space at Wattanosoth Hospital to meet the increasing demand of cancer patients. This international hospital is expected to be opened by Additionally, a total of greenfield 52 beds focusing on elderly care and rehabilitation for patients who require extended hospitalisation will open this year. Note that the Bangkok Hospital Chiang Rai, the Phoenix project and an expansion of Samitivej Sukhumvit will roll out in Expect loss contribution from wellness centre until FY19 The opening of the OPD section of BDMS s wellness centre is rescheduled from 2Q17 to 4Q17, while the IPD section will be opened slightly later with 50 members targeted in the first year and 500 (its maximum capacity) in five years. Management expects the EBITDA of this project to break even in FY19 and bottom line to break even in FY20. In the long run, this investment should boost BDMS organic revenue growth to 11-12% (from 8-10% currently) and its profitability, given its attractive EBITDA margin target of 30%. Valuation: We have a BUY call on BDMS with a lower DCF-based TP of Bt24.0. Key Risks to Our View: Political unrest could affect medical tourism in the country and derail BDMS s international revenue growth targets. At A Glance Issued Capital (m shrs) 15,491 Mkt. Cap (Btm/US$m) 323,761 / 9,368 Major Shareholders (%) Prasarttong-Osoth's Family 21.8 Thongtang's Family 14.1 Bangkok Airways 6.5 Free Float (%) 3m Avg. Daily Val (US$m) 15.4 ICB Industry : Health Care / Health Care Equipment & Services ed: CK / sa:cs, PY

2 CRITICAL DATA POINTS TO WATCH Earnings Drivers: Aggressive expansion. BDMS now has 43 operational hospitals and is only a few steps from reaching its goal of 50 hospitals in Thus, management has revised down its topline growth guidance for its hospital business from 10-11% previously to 8-10% (excluding BDMS wellness clinic), which is in line with our forecast, and focus more on the profitability improvement. However, its non-hospital business, i.e. Saline business, still has a strong growth outlook (35% p.a. growth) but its revenue contribution is just c.5% of the hospital business. 35.0% 30.0% 25.0% 20.0% 15.0% 10.0% 5.0% 0.0% Profitability 32.9% 32.9% 31.7% 32.6% 31.1% 29.0% 29.6% 21.3% 22.2% 22.1% 23.6% 22.2% 19.9% 19.8% 12.7% 13.6% 13.1% 14.7% 13.5% 11.2% 11.9% Q16 2Q16 3Q16 4Q16 Gross Profit Margin (GPM) EBITDA margin Net Profit Margin (NPM) To upgrade its existing 12 hub hospitals to excellence centres. BDMS targets to increase its international patients portion to account for 50% of its portfolio (vs 30% currently) and maximise the group s profitability instead of volume growth. BDMS expects to upgrade its 12 hub hospitals to excellence centres* (tertiary-care centres) to high standards as the leading hospitals in Singapore and Australia in the first phase, and reach the same standards as leading hospitals in the US and Europe but at competitive prices. Currently, in order to achieve this goal, BDMS has both international and local medical partnerships. * Note that BDMS has currently announced only nine hub hospitals* that will be upgraded to excellence centres. New hospitals a drag on profit in the initial two years. Out of the total of 43 hospitals, 13 are categorised as new hospitals, which are units that have been operational for less than two years. Despite strong revenue growth, new hospitals are usually loss-making at the EBITDA level for at least two years. The aggressive expansion since 3Q14, together with the economic slowdown, has put pressure on EBITDA and net margins for the group. Topline growth was hit by external factors. The effects of the economic slowdown and weak oil prices are more evident when we look at the revenue breakdown. In FY16, international and Thai patient revenue rose by 5% and 9% y-o-y, respectively, which disappointed the market (given BDMS s previous target for topline growth was 10-11%) as a result of the soft economy and weak oil prices. Note that the current BDMS s revenue growth target is 2-3x of Thailand s GDP growth rate Hospitals Number of hospitals Expansion Plan 1st Capacity phase Green Field Hospitals Commission Date BDMS Wellness Clinic n/a OPD 2017 Bangkok Hospital Surat Bangkok Hospital Chiangrai Expansion of Existing Hospitals Chiva Residence Royal Care Project Patient revenue by type Social Security, Others, 4% 2% Contract, 9% F Insurance, 24% Selfpay, 61% Source: Company, DBSVTH Page 2

3 Balance Sheet: Despite its recent mega investment in the BDMS wellness clinic, we expect BDMS to end FY17F with a net gearing ratio of 0.5x. We expect BDMS to issue Bt9bn worth of debentures in 1Q17 to finance the capex of the BDMS wellness clinic project. Share Price Drivers: Strong economic recovery (c.4% growth), especially in the provincial markets, could boost EBITDA for the new hospitals and the group. Of the total 13 new hospitals, only Bangkok Chinatown Hospital is in Bangkok. Key Risks: Political turmoil. Political unrest could deter medical tourism in the country and derail BDMS s international revenue growth targets. Weak economy in the provinces. The group s operation in Bangkok is less vulnerable to the Thai economy as i) the volume of foreign patients going to the HQ and Phayathai group continues to increase, and ii) the provincial economy was hit harder by lower farm income. Since seven of the new hospitals (which are currently loss-making) are located outside Bangkok, BDMS is relying on provincial markets to make a strong comeback in FY17F. Leverage & Asset Turnover (x) A 2015A 2016A 2017F 2018F Gross Debt to Equity (LHS) Asset Turnover (RHS) Capital Expenditure Btm 12, , , , , , A 2015A 2016A 2017F 2018F Capital Expenditure (-) 16.0% 14.0% 12.0% ROE (%) Company Background Public Company Limited (BDMS) owns and operates 43 hospitals with a total of 7,669 structured beds under six hospital brands. It is the largest private hospital in Thailand in terms of revenue from patient services and market capitalisation. With its hub-and-spoke model, BDMS aims to provide a strong patient referral system and higher efficiency through scale. Revenue breakdown FY16 Thai: 71%, Int l: 29% OPD: 46%, IPD: 54% 10.0% 8.0% 6.0% 4.0% 2.0% 0.0% (x) A 2015A 2016A 2017F 2018F Forward PE Band (x) +2sd: 46.8x +1sd: 41.9x Avg: 37x -1sd: 32.2x -2sd: 27.3x 21.2 Mar-13 Mar-14 Mar-15 Mar-16 (x) PB Band (x) sd: 7.36x +1sd: 6.71x Avg: 6.05x -1sd: 5.4x -2sd: 4.74x Mar-13 Mar-14 Mar-15 Mar-16 Source: Company, DBSVTH Page 3

4 Appendix: I BDMS international and local medical partnerships Source: Company, DBS Vickers Appendix II: Centres of Excellence Source: Company, DBS Vickers Page 4

5 Appendix III: BDMS s healthcare network Hospitals Structured beds Group 1 (Bangkok hospital brand) 1 Bangkok Hospital Bangkok Heart Hospital 97 3 Wattanosoth Hospital 48 4 Bangkok Huahin 60 5 Bangkok Chinatown 59 6 Sanamchan Thepakorn Muang Petch Muangraj 125 Group 2 (Samitivej and BNH brand) 10 Samitivej Sukhumvit Samitivej Srinakarin Samitivej Sriracha Samitivej Thonburi Samitivej Chonburi BNH Hospital 144 Group 3 (East) 16 Bangkok Pattaya Bangkok Rayong Bangkok Chanthaburi Bangkok Trat Sri Rayong 195 Group 4 (North, Northeast and Cambodia) 21 Bangkok Chiangmai Bangkok Ratchasima Bangkok Pakchong Bangkok Udon Bangkok Phitsanulok Bangkok Khon Kaen Bangkok Phrapradaeng Royal Phnom Penh Royal Angkor International 30 Group 5 (Phyathai and Paolo brand) 30 Phyathai Phyathai Phyathai Phyathai Sriracha Phyathai Nawamin Paolo Paholyothin Paolo Samutprakarn Paolo Chokchai Paolo Rangsit 150 Group 6 (South) 39 Bangkok Phuket Phuket International Dibuk Bangkok Hat Yai Bangkok Samui 52 Total 7,669 Group 7: Non-Hospital Ownership i) National Healthcare System 100% ii) Bio Molecular Laboratories 95% iii) The Medicipharma 87% iv) A.N.B Laboratories 100% v) Save Drug Center 100% vi) General Hospital Products 45% Source: Company, DBS Vickers Page 5

6 Income Statement (Btm) FY Dec 2014A 2015A 2016A 2017F 2018F Revenue 54,341 60,262 65,237 71,434 77,506 Cost of Goods Sold (36,473) (41,130) (45,277) (49,615) (53,816) Gross Profit 17,869 19,133 19,960 21,819 23,690 Other Opng (Exp)/Inc (11,257) (12,827) (13,644) (14,844) (16,276) Operating Profit 6,611 6,305 6,316 6,975 7,414 Other Non Opg (Exp)/Inc 2,271 3,411 3,629 3,755 4,018 Associates & JV Inc 1,068 1,259 1,370 1,584 1,713 Net Interest (Exp)/Inc (895) (1,089) (829) (1,164) (1,153) Exceptional Gain/(Loss) Pre-tax Profit 9,340 10,095 10,694 11,149 11,991 Tax (1,671) (1,864) (1,922) (2,057) (2,210) Minority Interest (276) (314) (385) (385) (385) Preference Dividend Net Profit 7,394 7,917 8,386 8,707 9,396 Net Profit before Except. 7,109 7,709 8,178 8,707 9,396 EBITDA 13,655 15,362 16,118 17,609 18,875 Growth Revenue Gth (%) EBITDA Gth (%) Opg Profit Gth (%) 17.1 (4.6) Net Profit Gth (Pre-ex) (%) Margins & Ratio Gross Margins (%) Opg Profit Margin (%) Net Profit Margin (%) ROAE (%) ROA (%) ROCE (%) Div Payout Ratio (%) Net Interest Cover (x) Source: Company, DBSVTH Page 6

7 Quarterly / Interim Income Statement (Btm) FY Dec 4Q2015 1Q2016 2Q2016 3Q2016 4Q2016 Revenue 15,957 16,406 14,863 17,299 16,669 Cost of Goods Sold (10,888) (11,061) (10,558) (11,926) (11,732) Gross Profit 5,068 5,346 4,305 5,372 4,937 Other Oper. (Exp)/Inc (3,359) (3,311) (3,216) (3,592) (3,525) Operating Profit 1,709 2,035 1,088 1,780 1,412 Other Non Opg (Exp)/Inc ,054 1,000 Associates & JV Inc Net Interest (Exp)/Inc (273) (204) (170) (231) (236) Exceptional Gain/(Loss) Pre-tax Profit 2,625 3,058 2,150 3,003 2,691 Tax (507) (563) (393) (563) (403) Minority Interest (68.3) (88.8) (87.5) (107) (102) Net Profit 2,050 2,406 1,669 2,334 2,186 Net profit bef Except. 2,050 2,406 1,669 2,334 1,977 EBITDA 4,061 4,414 3,475 4,476 3,974 Growth Revenue Gth (%) (9.4) 16.4 (3.6) EBITDA Gth (%) (21.3) 28.8 (11.2) Opg Profit Gth (%) (46.5) 63.6 (20.7) Net Profit Gth (Pre-ex) (%) (30.6) 39.8 (15.3) Margins Gross Margins (%) Opg Profit Margins (%) Net Profit Margins (%) Balance Sheet (Btm) FY Dec 2014A 2015A 2016A 2017F 2018F Net Fixed Assets 46,502 52,950 55,410 57,265 57,658 Invts in Associates & JVs Other LT Assets 34,047 34,047 34,047 34,047 34,047 Cash & ST Invts 5,472 2,534 5,508 19,288 24,126 Inventory 1,111 1,246 1,372 1,214 1,317 Debtors 5,819 5,819 5,819 5,819 5,819 Other Current Assets Total Assets 93,228 96, , , ,363 ST Debt 4,143 4,143 3,143 2,143 2,143 Creditor 4,408 4,943 5,445 6,860 7,443 Other Current Liab 4,327 4,799 5,195 5,688 6,172 LT Debt 27,279 25,279 25,279 35,279 33,279 Other LT Liabilities 4,115 4,115 4,115 4,115 4,115 Shareholder s Equity 46,780 51,134 56,437 60,652 66,565 Minority Interests 2,174 2,488 2,874 3,259 3,645 Total Cap. & Liab. 93,228 96, , , ,363 Non-Cash Wkg. Capital (1,528) (2,369) (3,115) (5,150) (6,083) Net Cash/(Debt) (25,951) (26,889) (22,915) (18,135) (11,297) Debtors Turn (avg days) Creditors Turn (avg days) Inventory Turn (avg days) Asset Turnover (x) Current Ratio (x) Quick Ratio (x) Net Debt/Equity (X) Net Debt/Equity ex MI (X) Capex to Debt (%) Z-Score (X) Source: Company, DBSVTH Page 7

8 Cash Flow Statement (Btm) FY Dec 2014A 2015A 2016A 2017F 2018F Pre-Tax Profit 9,340 10,095 10,694 11,149 11,991 Dep. & Amort. 3,705 4,387 4,803 5,296 5,730 Tax Paid (1,951) (2,198) (2,179) (2,416) (2,591) Assoc. & JV Inc/(loss) (1,068) (1,259) (1,370) (1,584) (1,713) Chg in Wkg.Cap. (114) , Other Operating CF (4,997) 1,370 1,404 1,721 1,871 Net Operating CF 4,916 13,237 14,099 16,202 16,222 Capital Exp.(net) (11,109) (10,613) (7,041) (6,929) (5,901) Other Invts.(net) Invts in Assoc. & JV Div from Assoc & JV Other Investing CF Net Investing CF (11,109) (10,613) (7,041) (6,929) (5,901) Div Paid (2,876) (3,563) (3,083) (4,492) (3,483) Chg in Gross Debt 8,697 (2,000) (1,000) 9,000 (2,000) Capital Issues Other Financing CF 1, Net Financing CF 7,484 (5,563) (4,083) 4,508 (5,483) Currency Adjustments Chg in Cash 1,290 (2,938) 2,974 13,780 4,838 Opg CFPS (Bt) Free CFPS (Bt) (0.4) Source: Company, DBSVTH Target Price & Ratings History Bt Mar-16 May-16 Jul-16 Sep-16 Nov-16 Jan-17 S.No. Date of Report Closing Price 12-mth Target Price Rating 1: 19 May HOLD 2: 01 Aug HOLD 3: 15 Aug HOLD 4: 02 Sep BUY 5: 30 Sep BUY 6: 27 Oct BUY 7: 15 Nov BUY 8: 21 Nov BUY 9: 15 Dec BUY 10: 23 J an BUY 11: 07 Feb BUY 12: 01 Mar BUY Source: DBSVTH Analyst: Apichaya KETRUTTANABORVORN Note : Share price and Target price are adjusted for corporate actions. THAI-CAC Corporate Governance CG Rating 2016 n/a THAI-CAC is Companies participating in Thailand's Private Sector Collective Action Coalition Against Corruption programme (Thai CAC) under Thai Institute of Directors (as of October 28, 2016) are categorised into: Score Declared Certified Description Companies that have declared their intention to join CAC Companies certified by CAC. Corporate Governance CG Rating is based on Thai Institute of Directors (IOD) s annual assessment of corporate governance practices of listed companies. The assessment covers 235 criteria in five categories including board responsibilities (35% weighting), disclosure and transparency (20%), role of stakeholders (20%), equitable treatment of shareholders (10%) and rights of shareholders (15%). The IOD then assigns numbers of logos to each company based on their scoring as follows: Score Range Number of Logo Description Excellent Very Good Good Satisfactory Pass <50 No logo given N/A Page 8

9 DBSVTH recommendations are based an Absolute Total Return* Rating system, defined as follows: STRONG BUY (>20% total return over the next 3 months, with identifiable share price catalysts within this time frame) BUY (>15% total return over the next 12 months for small caps, >10% for large caps) HOLD (-10% to +15% total return over the next 12 months for small caps, -10% to +10% for large caps) FULLY VALUED (negative total return i.e. > -10% over the next 12 months) SELL (negative total return of > -20% over the next 3 months, with identifiable catalysts within this time frame) Share price appreciation + dividends Completed Date: 27 Mar :58:52 (THA) Dissemination Date: 27 Mar :09:23 (THA) GENERAL DISCLOSURE/DISCLAIMER This report is prepared by DBS Vickers Securities (Thailand) Co Ltd (''DBSVTH''). 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