Target price : Bt25.60
Recommendation : BUY
Closing Price (27 Feb 09) : Bt21.20
4Q08 net profit beat forecast, full-year 2008 net profit up 3.89% YoY (excluding ex-items)
- BH posted a 2008 net profit of Bt1,191.05m, up 3.89% YoY excluding a one-off gain of Bt459m a year earlier. Fourth-quarter net profit came in at Bt291.70m, down 4.39% QoQ but up 10.34% YoY, excluding ex-items.
- With the increased portion of revenues from domestic patients to offset the decline in lost revenue from international patients and more effective cost controls, we expect 2009 net profit to be similar to a year earlier at Bt1,191m.
- We keep a BUY opinion on BH with a 2009 price target of Bt25.6/share.
2008 net profit of Bt1,191.05m, up 3.89% YoY (excluding one-off gain of Bt459m in 2007)
Service revenue upped 3.36% YoY to Bt8,757.31m. Outpatient (OPD) revenue edged up 9% and inpatient (IPD) revenue rose 1%. Costs climbed upwards on higher depreciation charges for a new building opened in May 2008. For the whole of 2008, depreciation charges rose to Bt459.36m against Bt407.63m a year earlier. Gross margin slipped to 33.95% from 34.76%. Thanks to tight expense controls, the SG&A expenses to sales ratio was similar to a year earlier. Operating profit came in at Bt1,577.56m, down 0.73% YoY. Interest expenses jumped on increased loans. Other income increased on the 'Healthy Living Club' membership sales. Profit contribution from affiliates rose (excluding a one-off gain a year earlier) as operating performance at the individual operations, except in Dubai improved. Bumrungrad International Limited made a full provision of approximately Baht 76 million (at Bumrungrad International Limited level) for the investment in Bumrungrad Hospital Dubai. Effective tax rate fell to 28.27% from a year-ago level of 29.02% because the company was able to take advantage of the tax savings scheme issued by the Revenue Department allowing 25% of theCompany's qualified CAPEX to be tax deductible expense. BH posted a 2008 net profit of Bt1,191.05m, up 3.89% from the Bt1,146.46m profit it made a year earlier (excluding a Bt459m gain from sale of GCS).
BH reported a 4Q08 net profit of Bt291.70m. The result beat our forecast of a Bt273.84m profit due partially to a sharp drop in tax expenses. Fourth-quarter revenue came in at Bt2,136.34m, down 5.13% QoQ. Gross margin narrowed as a result of falling revenue and a rise in depreciation charges to Bt128m from Bt124m in 3Q08. SG&A expenses also jumped to Bt365.67m following the opening of a new building. Operating profit dropped to Bt342.53m from Bt393.18m in 3Q08. Tax expenses significantly fell to Bt80.76m from Bt116.99m in 3Q08, as the advantage of the tax savings scheme issued by the Revenue Department allowing 25% of the Company's qualified CAPEX to be tax deductible expense.
Flat profit forecast for 2009
This year the company has a strategy to improve its local revenue base up from the current of only 45%, according to the impact from a drop in international patient volume. BH will offer discounts on medical treatment packages and launch privilege cards, "Healthy Living Club", that allow cardholders to enjoy discounts on service charges and medical fees. We expect 2009 revenue to be about Bt9,074.88m, up 3.63% YoY. Gross margin is forecast at 34.1%. Depreciation charges tend to edge higher but revenues seem to grow modestly. It is therefore hard for gross margin to expand. We estimate 2009 net profit to be flat from a year earlier at Bt1,191.00m.
BUY rating with 2009 price target of Bt25.6/share
We keep a BUY opinion on BH with a 2009 price target of Bt25.6/share.
By Phillip Securities (Thailand) Plc. on Mar 2, 2009
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