瑞信-亚太地区-医疗保健行业-泰国医疗保健行业：高端品牌压力大小品牌更好-2019.5.8-42页.pdf

DISCLOSURE APPENDIX AT THE BACK OF THIS REPORT CONTAINS IMPORTANT DISCLOSURES,ANALYST CERTIFICATIONS,LEGAL ENTITY DISCLOSURE AND THE STATUS OF NON-US ANALYSTS.US Disclosure:Credit Suisse does and seeks to do business with companies covered in its research reports.As a result,investors should be aware that the Firm may have a conflict of interest that could affect the objectivity of this report.Investors should consider this report as only a single factor in making their investment decision.8 May 2019 Asia Pacific/Thailand Equity Research Healthcare Facilities Thailand Healthcare Sector Research Analysts Thaniya Kevalee 66 2 614 6219 thaniya.kevaleecredit- Siriporn Sothikul,CFA 662 614 6217 siriporn.sothikulcredit- SECTOR REVIEW Pressure on high end,small names better off Figure 1:FY19-21 average EPS growth Source:Company data,Credit Suisse estimates Downgrade BDMS to NEUTRAL.High-end hospitals in Bangkok have already shown slower-than-average growth.With BH starting aggressive promotions and newcomer TPP Healthcare International completing its 550-bed facility in 2Q20,we expect competition to heat up(25%of BDMSs revenue is in this segment).This,and latest guidance,leads to 8-15%cuts in FY19-20E BDMS EPS and we lower our TP to Bt24(from Bt30).Better value in CHG and RJH.We estimate smaller names to deliver better EPS growth with ROE expansion.CHG should see earnings growth inflection from 3Q19(in spite of a 6%EPS downgrade over FY19-20)and with a big underperformance and valuation discount,we upgrade the stock to an OUTPERFORM(TP raised to Bt2.4 from Bt2.3).We downgrade BCH to NEUTRAL on its strong share price run and FY19-20E EPS is cut 5-8%.We raise RJHs FY19-20E EPS by 6-8%and maintain OUTPERFORM.Fair multiples reflect our preference.Our TPs place BH and BDMS at 1SD below their mean,implying multiple deratings.CHG and RJH should see some multiple rerating but our target multiple for CHG is also at 1SD below the mean to reflect our conservative judgement in light of past disappointments.We replace BCH with CHG as our top pick as valuations have discounted likely negative EPS growth during 1H19.Regulatory risk likely benign.While noise may re-emerge occasionally,we do not expect drastic action from regulators.Disclosure of prices and costs(of medicines)may be implemented,but we expect a relatively mild impact.Still,this incident may lead to increased(very)long-term risk and the sector may never return to its peak multiple.P/E 28.8xP/E 37.4xP/E 30.5xP/E 36.9xP/E 23.4x0369121518BHBDMSCHGBCHRJH(YoY%)UNDERPERFORMNEUTRALOUTPERFORMNEUTRALOUTPERFORM 8 May 2019 Thailand Healthcare Sector 2 Focus charts Figure 2:Supply of privately owned premium grade hospitals in Bangkok Figure 3:BDMSs EBITDA margin Source:Company data,Credit Suisse estimates Source:Company data,Credit Suisse estimates Figure 4:FY19-21 ROE movements Figure 5:CHGs EPS growth Source:Company data,Credit Suisse estimates Source:Company data,Credit Suisse estimates Figure 6:BDMS 12-month forward P/E Figure 7:CHG 12-month forward P/E Source:Thomson Reuters Datastream,company data,Credit Suisse estimates Source:Thomson Reuters Datastream,company data,Credit Suisse estimates 5405405405405405405405185686186686886886882752752752752752752750010015020025055005001,0001,5002,0002,50020182019E2020E2021E2022E2023E2031E(#of beds)BHBDMS HQSamitivej SukhumvitTPP Healthcare192021222324252613141516171819E20E21E(%)CurrentPrevious1317212529BHBDMSCHGBCHRJH(%)20182021E02468101214161516171819E20E21E(YoY%)24283236404448Jan-13Jun-13Nov-13Apr-14Sep-14Feb-15Jul-15Dec-15May-16Oct-16Mar-17Aug-17Jan-18Jun-18Nov-18Apr-19Sep-19Feb-20(x)12m fwd P/E(x)12m fwd P/E at TP(x)Avg.12m fwd P/E(x)+1 STD-1 STD152535455565Dec-13Apr-14Aug-14Dec-14Apr-15Aug-15Dec-15Apr-16Aug-16Dec-16Apr-17Aug-17Dec-17Apr-18Aug-18Dec-18Apr-19Aug-19Dec-19Apr-20(x)12m fwd P/E(x)12m fwd P/E at TP(x)Avg.12m fwd P/E(x)+1 STD-1 STD 8 May 2019 Thailand Healthcare Sector 3 Pressure on high end,small names better off Downgrade BDMS to NEUTRAL High-end hospitals in Bangkok,i.e.,BH and BDMSs headquarter hospital(HQ),have already delivered slower-than-average revenue and EBITDA growth rates over FY16-18.In 1Q19,BH started aggressive promotional campaigns to spur volume,indicating pricing pressure may have begun.We expect competition to heat up next year,with the newcomer(in this segment),TPP Healthcare Internationala 42%-owned subsidiary of listed Mahachai Hospital(M-CHAI.BKK,not covered)completing its 550-bed facilities in 2Q20.BDMS is also adding 170 beds at its headquarter campus.These additions represent 54%of supply in this segment,although it would take years to ramp up to full capacity:we expect a supply increase of 11%within a year and 28%in the next three years.TPP Healthcare has also pulled in nearly 100 doctors(some are or were from BH)as shareholders and aims to price its services about 20%cheaper than BHs.BDMS has 25%of its beds in this segment.This,coupled with latest management guidance,leads us to 8-15%cuts in BDMSs FY19-20E EPS and to lower our TP to Bt24(from Bt30).We downgrade BDMS to NEUTRAL and reiterate our UNDERPERFORM call on BH.Better value in CHG and RJH Our forecasts imply that CHG,RJH and BCH deliver better EPS growth,with ROE expansion(as opposed to an expected ROE contraction for BH and to a lesser extent BDMS).CHG should continue suffering YoY EPS falls during 1H19 due to the high base in 1H18,but we expect a decent recovery from 2H19(although we downgrade FY19-20E EPS by 6%to reflect 4Q18 results and new guidance).Continued strong growth in cash patient revenue indicates that margins should recover at some point.With big underperformance and a valuation discount,we upgrade CHG to OUTPERFORM and raise our TP from Bt2.30 to Bt2.4.We downgrade BCH to NEUTRAL due to its strong share price performance and FY19-20E EPS being cut by 5-8%(the TP is lowered from Bt21 to Bt19)to reflect latest guidance.We raise RJHs FY19-20E EPS by 6-8%(maintaining our TP at Bt31 with an OUTPERFORM rating),incorporating stronger-than-expected 2018 results and new guidance from management.Fair multiples reflect our preference Our TPs place BH and BDMS at 1SD below their mean,implying multiple deratings in light of their less attractive growth.CHG and RJH,on the other hand,should see some multiple rerating but the target multiple for CHG is also at 1SD below the mean to reflect our conservative judgement in light of past disappointments.We replace BCH with CHG as our top pick;CHGs valuation appears to have discounted likely negative EPS growth during 1H19.RJH offers the highest potential upside to TP,but it has low trading liquidity and therefore is our second pick.Regulatory risk likely benign Early this year,the cabinet has approved the Ministry of Commerces(MOC)proposal to place medicines,medical supplies and hospital services under the watch list of the Department of Internal Trade(DIT).So far,no definite measures have been concluded and thus noises could reemerge occasionally,disturbing sector sentiment.We do not expect drastic action from regulators based upon the experiences and policies from more advanced economies.Disclosure of prices and costs(of medicines)may be implemented,but we expect a relatively mild impact on the sector.Still,this incident may lead to increased(very)long-term risk and the sector may never return to its peak multiple.TPP to heat up competition in the Bangkok high-end segment Upgrade CHG to an OUTPERFORM,downgrade BCH to a NEUTRAL BH,BDMS and CHG target multiples at 1 SD below their mean Impact unlikely to be significant but disturbing noises may continue 8 May 2019 Thailand Healthcare Sector 4 Table of contents Focus charts 2 Pressure on high end,small names better off 3 Downgrade BDMS to NEUTRAL.3 Better value in CHG and RJH.3 Fair multiples reflect our preference.3 Regulatory risk likely benign.3 Downgrade BDMS to NEUTRAL 6 Rising pressure on Bangkoks high-end hospitals.6 Pricing strategy seems to have begun.6 Supply is poised to rise sharply.6 TPP Healthcare International could be a strong threat.7 25%of BDMS revenue is in this segment.9 Cutting BDMS EPS and target price.11 Better value in CHG and RJH 12 Higher EPS growth with ROE expansion.12 Upgrade CHG to OUTPERFORM.13 CHGs strong cash patient revenue likely to continue.13 Downgrade BCH to NEUTRAL on strong share price run.15 Regained SSO special quota.16 Cash patients revenue has a solid growth outlook.16 RJH:continued market share gain in Ayutthaya.17 Both cash patient and SSO are key drivers.18 EBITDA margin should continue expanding.19 Maintaining target price at Bt31.19 Fair multiples reflect our preference 20 BDMS and BH fair multiples at 1 SD below means.20 CHG and RJH deserve some multiple rerating.20 BCH multiple to stay unchanged.21 Regulatory risk likely benign 23 Private hospital prices are under watch list.23 DIT hardly imposed ceiling on product and service prices.23 No other countries control prices at private hospitals.25 Price/cost disclosure:likely limited impact.26 Bangkok Dusit Medical Services(BDMS.BK/BDMS TB)27 8 May 2019 Thailand Healthcare Sector 5 Bumrungrad Hospital Pcl(BH.BK/BH TB)29 Bangkok Chain Hospital(BCH.BK/BCH TB)31 Chularat Hospital(CHG.BK/CHG TB)33 Rajthanee Hospital Public Company Limited(RJH.BK/RJH TB)35 8 May 2019 Thailand Healthcare Sector 6 Downgrade BDMS to NEUTRAL Rising pressure on Bangkoks high-end hospitals There are few high-end hospitals in Bangkok owned by the private sector that offer comprehensive/premium grade services at premium prices.We believe only BH,BDMS(HQ)and Samitivej Sukhumvit(also owned by BDMS)can be classified in this category.This unique segment is heading for greater competitive pressure,with the newcomer in this segment TPP Healthcare Internationala 42%-owned subsidiary of listed Mahachai Hospital(M-CHAI.BKK,not covered)entering the market from 2Q20.As Figures 8 and 9 show,BH and BDMS(HQ)have already underperformed peers in terms of average revenue and EBITDA growth over FY16-18.We believe this reflects relatively less demand for this segment compared with lower tier hospitals.Figure 8:FY16-18 average revenue growth Figure 9:FY16-18 average EBITDA growth *Centre of Excellence,excluding BDMS(HQ);Source:Company data,Credit Suisse research *Centre of Excellence,excluding BDMS(HQ);Source:Company data,Credit Suisse research Pricing strategy seems to have begun BH reported 1Q19 results which were below both our and market expectations,with the EBITDA margin falling 70 bp YoY and muted revenue growth(+0.8%YoY or+1.6%YoY adjusted for the Rotavirus impact in 1Q18).Selling expenses rose 47%YoY while the offered discount was unusually large during the quarter,as BH attempted to spur volume growth.Management said these strategies are discretionary and can be discontinued any time,but we feel that this could just be the beginning of the trend due to the expected rise in bed supply.Supply is poised to rise sharply In 3Q19,BDMSs Bangkok International Hospital,located within the headquarters campus,should be completed,with 170 additional beds.The first phase comprises 50 beds and it may take a few years to ramp up to maximum capacity.More threatening is the completion of TPP Healthcare International Hospital in 2Q20.At maximum capacity,this hospital is expected to have a total of 550 beds;the first phase comprises 200 beds with an initial launch of 100 beds.Thus,we expect supply in this segment to rise 11%next year(with the initial bed launches).Over a three-year period,the supply increase would be 28%and eventually 54%(by FY31,Figures 10 and 11).024681012141618BHBDMS HQBDMSCOE*BDMSoverallCHGBCHRJH(YoY%)0510152025BHBDMS HQBDMSCOE*BDMSoverallCHGBCHRJH(YoY%)BH and BDMS(high-end hospitals)likely to feel most impact BH raised promotional efforts in 1Q19 TPP to raise supply significantly and offer services at discount to BH and BDMS 8 May 2019 Thailand Healthcare Sector 7 Figure 10:Details of ded supply of privately owned premium grade hospitals in Bangkok Beds Remark Current supply BH 540 BMDS(HQ)518 Samitivej Sukhumvit*275 Total existing supply 1,333 New supply Bangkok International Hospital(3Q19)*50 Eventually 170 beds TPP Healthcare International Hospital(2Q20)100 Phase I 200 beds,eventually 550 beds Total new supply 150 Initial luanch only%of current supply 11%of current supply 28(BIH 170 beds+TPP 200 beds by FY22)%of current supply 54 Eventual capacity(BIH 170 beds+TPP 550 beds by FY31)*Owned by BDMS,*Part of BDMS(HQ)Source:Company data,Credit Suisse estimates Figure 11:Supply of privately owned premium grade hospitals in Bangkok Source:Company data,Credit Suisse estimates TPP Healthcare International could be a strong threat We believe this hospital has certain characteristics that could become a real threat for BH and BDMS due to the following reasons:1.The location is within a 5-10 km radius of BH,BDMS(HQ)and Samitivej hospitals.2.It targets the same market segments as these hospitals,i.e.,high-end Thais and international patients(both expat and medical tourists).As a result,it is investing heavily,with a total investment of Bt15 bn,i.e.,the investment cost per bed is Bt27 mn(nearly US$1 mn,Figure 12).3.It forms partnerships with doctors and their allies,allowing them to hold shares in the hospital(Figures 13 and 14).Some doctors used to or currently work with BH.This implies that it would have a higher ratio of full-time doctors to part-time doctors than most hospitals in Thailand.We understand that once the hospital expands(to reach its full capacity),more shares might be issued to new doctors in order to persuade them to join and dedicate their time to the hospital.5405405405405405405405185686186686886886882752752752752752752750010015020025055005001,0001,5002,0002,50020182019E2020E2021E2022E2023E2031E(#of beds)BHBDMS HQSamitivej SukhumvitTPP Healthcare 8 May 2019 Thailand Healthcare Sector 8 4.It aims to price its services at around a 20%discount to BH and BDMS(high-end hospitals).Figure 12:TPP Healthcare International Hospital features Targeted launch date 2Q20 Market segment Upper middle/upper class Thais,medical tourists,expats Location Rama IV road,Bangkok Total investment cost(Bt mn)15,000(Bt27 mn/bed)Bed capacity:2020 200 2022 250 2024 350 2027 400 2030 500 2031 550 Examination rooms:2020 100 2022 150 2024 200 2027 250 2030 300 No.of doctors:2020 100 2022 125 2024 154 2027 188 Source:From opinion of independent financial advisor conducted for M-CHAI Figure 13:TPP Healthcare International Hospital shareholding structure *Owned by Medical personnel and allies(see Figure 14).Source:Company data(M-CHAI)Mahachai Hospital(M-CHAI)42%M-CHAIs diector and management6%TPP Holding*25%Other investors27%8 May 2019 Thailand Healthcare Sector 9 Figure 14:TPP Holding shareholding structure%ownership Remark Sinn Anuras M.D.10.78 20+years experience at BH(Group Medical Director till January 2017)Kanoknaphat Chaiyarak M.D.8.81 20 years experience as Pediatrics/Pediatric Cardiology Pornpinant E