BH Sees the Light as Thailand Lifts Lockdown, Paving Way for Foreign Patients to Return

Bumrungrad Hospital Public Company Limited (BH) is finally seeing the light at the end of the tunnel, as Thailand has lifted some of lockdown restrictions, allowing the country to reopen.

Prior to COVID-19, revenue from international patients accounted for 67% of BH’s total income. Daily COVID cases have been dropping and the  number discharged is greater than new cases. Moreover, Thailand has vaccinated 32.6 million residents or 50% of its population. For this reason, Krungsri Securities (KSS) believes it will be a prime beneficiary on BH, in particular the return of foreign patients.

KSS stated that BH’s earnings had already bottomed out the worst and will gradually improve in 2H, relative to 1H, driven by a higher number of non-COVID and COVID patients. BH has expanded COVID ward capacity by 31% to 88 beds and hospitel capacity by 46% to 351 rooms. Utilization rate rose to 90% in 2Q from 79% in 1Q. In 4Q, the earnings drivers  would be taking delivery of 17,000 doses of Moderna vaccine and the return of foreign patients who normally seek high-intensity treatments. BH will also save 110 million baht in costs in 2H.

BH reported total revenue in 2Q21 of 3,020.17 million baht, increased from 2Q20 total revenues of 2,452.06 million baht. Net profit for 2Q21 increased by 387.2% to 216.47 million baht from 44 million baht in 2Q20. An improvement in 2Q21 performance was primarily due to the increase in revenues from Thai, expat and international patients from Alternative Hospital Quarantine (AHQ) service. 

Meanwhile, total revenues for 1H21 decreased to 5,694 million baht, compared to 6,586  million baht in 1H20. Net profit for 1H21 decreased by 62.0% to 308 million baht from 810 million baht in 1H20. The decrease was mostly attributed to a decline in foreign patients.

With such results, KSS cut BH’s 2021 earnings by 28% to 1.2 billion baht to reflect weak 1H operations. But, maintaining 2022 and 2023 earnings forecasts as KSS expects borders to reopen soon and BH has 300 foreign patients on the waiting list. They will also take delivery of 50,000 doses of Moderna vaccine in Jan 2022, book 125 million baht interest-savings, and enjoy high operational leverage. 

KSS expects BH’s profit to jump 88% in 2022 and 13% in 2023. They are in a 5.4 billion baht net debt position. BH is likely to maintain 3.2 baht DPS, implying 2.4% yield. BH is trading at only 0.6x PEG (FY22F). Thus, KSS raises a target price on BH by 5% to 155 baht.