Facility Expansion And Genomic Medicine Investments Set To Drive Robust Revenue Growth

Key Takeaways

• Expansion and investment in advanced facilities and genomic medicine are set to attract patients, boosting future revenue growth.
  
• Growth in international patient segments and wellness services indicate future revenue and net margin improvements.
  
• Reliance on international markets and geopolitical instability threaten revenue growth, while expansion projects and competitive pressures may strain financial resources and impact profitability.

Catalysts

Owns and operates healthcare-related entities in Thailand and internationally.

• The expansion of Bumrungrad's medical facilities, including the BIH annex and new buildings such as the Soi 1 IPD building and the advanced technology center, is expected to increase capacity and attract more patients, impacting future revenue growth.
  
• The investment in genomic medicine and certification as a leader in this field enhances Bumrungrad's offerings, potentially increasing revenue from advanced medical services.
  
• The growth in the Chinese patient segment and expected stabilization in Middle Eastern markets like Kuwait could lead to a recovery in high-revenue international patient segments, boosting future earnings.
  
• The development of the new facility in Phuket and leveraging existing referral relationships may enhance Bumrungrad's market reach, positively impacting future revenue streams.
  
• VitalLife's expansion and its successful integration with Bumrungrad's facilities indicate potential for increased revenue from wellness services, which are generally higher margin, positively affecting net margins.

Bumrungrad Hospital Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Bumrungrad Hospital's revenue will grow by 6.1% annually over the next 3 years.
• Analysts assume that profit margins will shrink from 29.3% today to 27.1% in 3 years time.
• Analysts expect earnings to reach THB 8.4 billion (and earnings per share of THB 10.11) by about December 2027, up from THB 7.6 billion today. However, there is some disagreement amongst the analysts with the more bearish ones expecting earnings as low as THB 7.2 billion.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 33.1x on those 2027 earnings, up from 20.8x today. This future PE is greater than the current PE for the TH Healthcare industry at 23.7x.
• Analysts expect the number of shares outstanding to grow by 1.36% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.88%, as per the Simply Wall St company report.

Bumrungrad Hospital Future Earnings Per Share Growth

Risks

• Geopolitical instability, particularly in the Middle East and Myanmar, affects revenue from key patient segments, considering the reliance on international patients for higher revenue intensity. This could continue to impact overall revenue growth.
  
• A decline in patient revenue from significant markets like the Middle East, with a marked 67% decrease in revenue from Kuwait, highlights the dependence on international markets for earnings, posing a risk if these conditions persist.
  
• Economic factors such as high inflation and forex fluctuations in Myanmar may dampen patient flow, impacting revenue and earnings from these regions.
  
• The ongoing construction and expansion projects, such as the new hospital facilities and infrastructure upgrades, require substantial CapEx, which could pressure net margins and potentially strain financial resources if not balanced by proportional revenue increases.
  
• Competitive pressures, like those seen in the Indochina region with price wars, could affect margins by forcing price adjustments to maintain market share, potentially impacting profitability.

Valuation

• The analysts have a consensus price target of THB 274.14 for Bumrungrad Hospital based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of THB 330.0, and the most bearish reporting a price target of just THB 220.0.
  
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2027, revenues will be THB 30.9 billion, earnings will come to THB 8.4 billion, and it would be trading on a PE ratio of 33.1x, assuming you use a discount rate of 6.9%.
  
• Given the current share price of THB 198.5, the analyst's price target of THB 274.14 is 27.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.