Thai Healthcare Sector

Thailand's healthcare stocks have been in constant turmoil since an outbreak of novel coronavirus began in early 2020, and most recently, the emergence of the omicron variant has injected further volatility into this sector. Maybank Kim Eng Securities (Thailand) (MBKET) stated that the omicron will be short-lived and have a minimal impact on the Thai healthcare sector as: 1) approximately 70% of Thais will be fully vaccinated by Jan-22, approaching herd immunity; and 2) Thailand should have more experience managing COVID-19 compared to 2021. As a result, COVID infection should subside and will have two implications for the sector: 1) COVID income should decline substantially in FY22E, though will remain significant from private vaccination (paid for and booked in 1Q22) implying declines in earnings for both BCH (TP: THB21.50) and CHG (TP: THB4.50); and 2) the rise in medical tourism, which should benefit BH (TP: THB161.00) (2/3 of normalised revenues) and BDMS (TP: THB25.10) (30% of normalised revenues). MBKET anticipates that, despite COVID abatement, vitamin consumption will continue to grow as the health-conscious trend continues, which will benefit MEGA. MBKET factors in the higher-than-expected COVID income for FY22E, which results in 0.4-2.3% higher target prices for BDMS, CHG and BH. Due to price correction, while the outlook remains moderate, MBKET upgraded BH to BUY. MEGA is MBKET's Top Pick, with a given target price of THB63.50, citing the potential of continuing vitamin consumption and earnings growth post-COVID. MEGA is currently trading at a favorable P/E ratio of 23.2x FY22E, one of the cheapest among peers (average of 39.9x). The key upside surprise to MEGA’s earnings would be if COVID resurges, as it could increase COVID income and vitamin consumption.