Over the past month, BCH share price has risen 8%, beating the SET’s rise of 2%. Operational developments suggest QoQ growth in 3Q23, moving up to the year’s high in 4Q23, underwriting a rise in share price. BCH is trading at 35x 2023PE, which comes down to 29x 2024PE, below its historical average of 41x. We rate Outperform with end-2024 DCF TP of Bt23/share.
Catalysts.
- Positive tone from analyst meeting Wednesday. BCH maintains its target of Bt13bn revenue in 2023, suggesting better revenue in 2H23 after Bt5.5bn in 1H23. It is seeing strong revenue in July-August and expects 3Q23 revenue to grow QoQ (but drop YoY due to some revenue from COVID-19 services last year) underwritten by: 1) seasonal growth in Thai patient traffic, 2) rising revenue from international patient services (BCH targets Bt2.0bn in 2023 vs. Bt935mn in 1H23) especially from the Middle East, Myanmar, Cambodia and Lao PDR and 3) an average price increase of ~5% for self-pay patients since May and a 10% increase in SC general capitation (from Bt1,640/person/year to Bt1,808) effective May 1.
- New hospitals are ramping up with lower losses. Three new hospitals (Kasemrad International HospitalAranyaprathet, Kasemrad Hospital Prachinburi and Kasemrad International Hospital Vientiane) together reported EBITDA of Bt15mn in 2Q23, turning from an EBITDA loss of Bt8.3mn in 1Q23. BCH expects all three to break even at the net profit level in 1.5-2 years.
- Expect lower FX impact in 2H23. BCH (holding 68.47%) and remaining shareholders plan to increase capital at Kasemrad International Hospital Vientiane in Lao PDR to pay off its entire baht-dominated debt, expected to complete in September-October. This will reduce foreign currency risk for this hospital and consequently, the impact on BCH after consolidation. In 2Q23, BCH booked FX loss of Bt63mn as the kip depreciated against the baht, equivalent to 21% of its core profit.
- Earnings to improve QoQ in 3Q-4Q23. We maintain our projection of Bt1.4bn core earnings in 2023 and expect BCH’s core earnings to improve QoQ in 3Q23 and reach the year’s high in 4Q23.
Action & recommendation. Over the past month, BCH’s share price has risen 8%, beating the SET’s increase of 2%. We maintain our positive view on BCH and recommend investors accumulate the stock for even better earnings ahead. BCH is trading at 35x 2023PE and this comes down to 29x 2024PE, below its historical average of 41x (2015-19, a normal period before the COVID-19 pandemic). Our end-2024 DCF TP is to Bt23/share, based on WACC at 6.5% and LT growth at 3%.
Risks. Unpredictable events such as another pandemic that will interrupt patient traffic, intense competition, staff shortages and regulatory risk.
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