Bangkok Chain Hospital: Downside limited; poised for FY25F growth
- 1Q25F earnings to drop y/y and q/q from Kuwait’s high base last year
- Overall FY25F earnings to nonetheless grow 25% – driven by no SSO revenue reversal, lower loss of three new hospitals, and normalising ME market base
- Low risk of payment cut as SSO raised nationwide high-cost care budget by 30%
- Maintain BUY with a DCF-based TP of 19.00
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Management targets double-digit revenue growth in FY25F (vs. a low base of -9% y/y in FY24), supported by: i) the ramp-up of existing hospitals, ii) more stable SSO payments under the high-cost care scheme, and iii) continuous momentum in foreign patients, especially non-ME market and new markets such as Libya and the Maldives. BCH expects foreign patient revenue to contribute 15% in FY25F (vs. 14.6% in FY24F and 17.4% in FY23). There are no plans to increase prices in 1H25.
QTD revenue grew by mid-single-digits (vs. -6% y/y in 4Q24) especially Thai patients as BCH saw some improvement QTD from influenza outbreaks.
Middle East revenue baseline to stabilise in FY25F. In 4Q24, revenue from the Middle East market declined 59% y/y, contributing 3% of total revenue (vs. 8% in 4Q23 and 3% in 3Q24). The sharp decline was mainly due to a 79% y/y drop in Kuwait patient revenue, while revenue from the UAE and Oman grew 63% y/y and 33% y/y, respectively. BCH expects a positive recovery in Kuwait patient volume after Ramadan. Note that the UAE’s and Kuwait’s patients are predominantly self-pay.
Expect no revenue reversal for high-cost care due to higher budget. We expect a high likelihood for SSO to pay a fixed rate of THB12,000 per RW for high-cost care treatment in FY25F. This is supported by a 30% increase in the nationwide budget for high-cost care (adj. RW > 2), which should help offset the budget shortfall. Notably, the high-cost care budget in FY24F faced a 20% shortfall, resulting in lower payments to hospitals.
Two out of three new hospitals to breakeven at bottom line in FY25F. In 2024, KH Aranyaprathet and KH Vientiane reported positive EBITDA of THB26.4mn and THB33.2mn, respectively. However, KH Prachinburi posted a negative EBITDA of THB29.2mn. Management expects three new hospitals to generate loss < THB100mn (vs. loss of THB200mn in FY24).
The 2025-2027 capex plan of THB800mn includes renovation and expansion capacity in KH Pathumthani, KH Bangkae, KH Maesai, and KH Ramkhamhaeng. Meanwhile, the new greenfield hospital is still on track, with KH Suvarnabhumi and KH Rayong to open in 2027 and 2028, respectively.
Outlook
We expect BCH’s 1Q25F earnings to drop y/y but grow q/q. The y/y drop would be due to Kuwait’s high patient base, contribution dropping from 3.7% of total revenue in 1Q24 to 0.3% of total revenue in 1Q25F. The remaining Kuwait patients are from the self-pay segment. The q/q growth will be due to no revenue reversal in the high-cost care treatment under the SSO scheme.
Middle East market to stabilise, non-Middle East market growth to continue. Revenue from the ME market dropped from THB200-300mn/quarter in FY23F to THB 90-100mn/quarter in 2Q24-4Q24 due to issues with Kuwaiti patients. However, we believe the downside risk in the ME market is now limited, establishing a baseline for FY25F. As a result, we forecast ME patient revenue to reach THB400mn (-15% y/y) in FY25F.
Meanwhile, revenue from the non-ME market should continue to grow, reaching THB1,208mn (+15% y/y) in FY24F, with momentum expected to continue to THB1,317mn (+9% y/y) in FY25F, driven by growth in the China and CLMV markets.
Revenue from international patients in 1Q22-4Q24
2025 earnings to rebound 25% to THB1,598mn. We expect revenue to grow 25% y/y in FY25F, driven by i) the absence of THB245mn (THB81mn in 2Q24 and THB164mn in 4Q24) in revenue reversal under the SSO scheme; and ii) lower losses from three new hospitals (THB181mn in FY24F to THB100-120mn in FY25F). Meanwhile, revenue contribution from Middle Eastern patients should normalise to THB400mn (-15% y/y, 23% of total revenue) in FY25F vs. (THB472mn in FY24 and THB998mn in FY23).
Maintain BUY with a DCF-based TP of THB19.00. We arrive at a TP of THB19.00 based on a DCF valuation (WACC of 8.20%, terminal growth of 2.50%), implying a 30x PE. We expect BCH’s FY25F performance to be less volatile and show strong growth driven by i) absence of THB245mn in revenue reversal under the SSO scheme, ii) narrower losses from three new hospitals, and iii) revenue from the Middle East normalising. BCH is now trading at a 25.0x 2025F PE and offers a dividend yield of 2.4-2.6% in FY25F-FY26F. Key share price catalysts are a hike in reimbursement rate under the SSO scheme in FY25F and the expected return of Kuwait patients.
| FY Dec | 4Q2023 | 3Q2024 | 4Q2024 | % chg yoy | % chg qoq |
|---|---|---|---|---|---|
| Revenue | 3,114 | 3,261 | 2,927 | (6.0) | (10.2) |
| Cost of Goods Sold | (2,094) | (2,238) | (2,133) | 1.9 | (4.7) |
| Gross Profit | 1,020 | 1,023 | 794 | (22.2) | (22.4) |
| Other Oper. (Exp)/Inc | (392) | (417) | (414) | 5.8 | (0.6) |
| Operating Profit | 629 | 607 | 380 | (39.6) | (37.4) |
| Other Non Opg (Exp)/Inc | 40.3 | 24.1 | 65.7 | 63.1 | 172.7 |
| Associates & JV Inc | (0.30) | (0.14) | (1.25) | (313.1) | 774.8 |
| Net Interest (Exp)/Inc | (12.9) | (15.2) | (15.4) | (19.2) | (1.1) |
| Exceptional Gain/(Loss) | (82.0) | 0.00 | (81.6) | 0.5 | |
| Pre-tax Profit | 574 | 615 | 347 | (39.5) | (43.6) |
| Tax | (114) | (122) | (88.3) | (22.4) | (27.3) |
| Minority Interest | (32.4) | (40.5) | (26.7) | 17.7 | (34.0) |
| Net Profit | 427 | 453 | 232 | (45.7) | (48.8) |
| Net profit bef Except. | 509 | 453 | 314 | (38.4) | (30.8) |
| EBITDA | 904 | 871 | 720 | (20.4) | (17.3) |
| Margins | |||||
| Gross Margins (%) | 32.8 | 31.4 | 27.1 | ||
| Opg Profit Margins (%) | 20.2 | 18.6 | 13.0 | ||
| Net Profit Margins (%) | 13.7 | 13.9 | 7.9 |
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