May 26, 2013

Hospital Comparison - BGH vs BH

In 2012, Thailand had 2.4 million foreign medical tourists, generating 14 billion baht in revenue. For Singaporean readers, that is about SGD$ 600 million. The Tourism Authority of Thailand (TAT) further projects a growth to 3 million medical tourists over the next 3 years, which will double revenue growth.

According to TAT, 600,000 high income Chinese visited Switzerland and Singapore in 2012 for anti-ageing and cell treatments, expending an average of 2 million baht (SGD$ 84,000) per trip. To begin achieving that growth, the TAT will host the Medical & Wellness Tourism Trade event in August 2013 and about 50 tourism groups and agents globally are expected to attend the event in Bangkok.

The focus of this hospital comparison will be based on the lucrative medical tourism segment of healthcare operators, with little to no regard to the impending ''Silver Wave'' hitting most ASEAN countries in the near future.

Bangkok Hospital 
(Bangkok Dusit Medical Services, Ticker: BGH on the SET)

BGH is a fully equipped, internationally accredited tertiary with more than 40 years of experience. BGH operates hospitals covering Thailand, with a concentration in Bangkok, and also has a presence in Cambodia. It also invests in private hospitals and related healthcare services through its subsidiaries. BGH is the largest operator in Thailand, with a market cap. of 269.7 billion Baht (SGD$ 11.4 billion).

*BGH owns 23.94% of BH.

Bumrungrad Hospital
(Bumrungrad Hospital, Ticker: BH on the SET)

BH is an internationally accredited multi specialty hospital located in the heart of Bangkok. It offers state-of-the-art diagnostic, therapeutic and intensive care facilities in a one-stop medical center. BH is the largest private hospital in Southeast Asia and it serves over a million patients annually with almost half are internationals. BH is well-known worldwide as a leader in medical tourism, due to strong publicity and marketing in various international media and press. BH has a market cap. of 63.02 billion Baht (SGD$ 2.66 billion).

This is an excerpt from a comparison spreadsheet I did for myself.

I favor Bumrungrad for the higher margins. Book value for Bumrungrad stands at Bt. 12.49 vs Bt. 25.27. P/B is on par with each other, however Bumrungrad is a good 12.37% ahead in ROE.
In both cases dividend yields are unattractive so I shall not depend on the value of dividends.

Bangkok Dusit and Bumrungrad run slightly different models. One is a large operator of 30 hospitals and healthcare services and related businesses, while Bumrungrad is a slightly smaller outfit, running an international hospital. Bumrungrad has set the wheels in motion for expansion for an increase in capacity and also a new Women's and Children Hospital.

Bumrungrad is seeing slightly lower portion of revenue contribution from international patients while Bangkok Dusit's top international patient by countries are from the matured economies; Japan, UK, Australia, Germany, and also the new hot country, Myanmar.

Bumrungrad has USA (notorious for expensive healthcare), and the oil rich nations of Qatar, Oman, UAE. Myanmar contributes as much as the USA for Bumrungrad.

Bangkok Dusit will see a new hospital opening in 4Q13 in Cambodia, targetting the local and expat markets. They also increased their stake in Medic Pharma, a pharmaceutical manufacturer and distributor.

Bumrungrad has bought land for expansion, which sees CAPEX at a high in FY13, while CAPEX is projected to drop by about 30% in FY14. I believe Bumrungrad has already begun preparing for the rise in international patient volumes and revenue in the near term by the spike in CAPEX from FY12.

I see both BGH and BH as fundamentally strong companies well-placed to capture a large pie of medical tourism in Asia. However both are still overpriced and any meaningful correction will be a buying opportunity. At this moment, my preference is for Bumrungrad.

Related posts:


Getting a foot in on the medical tourism industry in ASEAN

An article in the Bangkok Post recently caught my attention, here it is below;

Medical tourism exists due to the failings of the patient's home country, which drives them to seek alternatives overseas.

A good example is the exorbitant healthcare bills and long waiting times in the US. My overseas colleagues have baulked at the cost of buying a car or an apartment in Singapore, however in all those years we have never thought to compare getting a facelift done, for example!

Growing up in Singapore, most Singaporeans and I are strongly confident in our hospitals, especially the private hospitals, and we believe they are among the top medical centres in the world.

Looking at medical tourism from an investor's viewpoint however, I believe Asia has the best potential in the present to 2015, and my top destination would be Thailand, over South Korea, Malaysia, India and yes, Singapore.

There are many factors for a patient to consider treatment overseas. The total cost, country, hospital, and accreditations are the basic. Other concerns such as post treatment care, success or infection rates, and medication will tip the patient over the decision fence.

The focus now will be on the cream of Asian hospitals; the ones who will likely benefit (and have already been benefiting) from foreign patients seeking complicated and advanced treatment.

Another important factor will also be the strength of that hospital in its home market. In the next post I will do a simple comparison among the selected companies.

May 15, 2013

CP Fund in the middle of May 2013

Wan nee wan poot 15 Deuan Pheut sa phaa kom bpee 2013

I have been taking Thai lessons! The above is just what students write on the above of their worksheets for the day, month, year :)

Portfolio Activity
1. Housekeeping - Disposed of Digiland at 0.001 for loss on commissions, just to tidy up the portfolio

2. Took profit on Mapletree Industrial (+35.96%), Mapletree Logistics (+29.35%). I believed that industrial rents are stretching too high for too long. Prior to the divestment, A-Reit reported weaker earnings which partially influenced my decision. Both were sold at dividend yields of slightly below 5% and at all time highs.

3. Quick trade on Wilmar (+2.14%).

4. Cut loss on UPP (-12.7%). Price has been spiralling downward since the company reported earnings. It was decent but not exciting enough. Stock was pumped up once to catch more retailers which I failed to divest for a small profit during that day, subsequently it was dumped again. This was a lesson learnt for me that if I wanted to build my portfolio with the intention of growth from solid counters, then avoid speculative counters with ''players'' such as this counter.

5. Maiden foreign trade on SET. Divested Thanachart (+10.86%). Stock was breaking new highs and the divestment was mainly to realise the gain sooner to have funds available to add on any sudden opportunities in the SGX.

1. Thaibev
2. Marco Polo Marine
3. CACHE Reit
4. Valuetronics
5. China Minzhong
6. Starhill Global

In order of size, Thaibev makes up 34% of the portfolio. Averaged up again at $0.555 during the dip when the stock was panic-sold when F&N was facing uncertainty to remain listed.

MPM and CMZ were the two counters selected for growth. I am holding onto CACHE and Starhill to maintain a small amount of passive income, together with Genting Perps. The REITS are below 1/3 of the fund which I had allocated for, so I may be looking to increase more shares in them or lookout for another REIT/Telco.

Valuetronics will likely be divested within 1 or 2 months when the seasonal activity returns. I also have a tiny amount by volume of Elektromotive that is still retained from the foolish days of penny punting.

Thaibev is the current crown jewel of the CP Fund. It is a play on the potential synergy of Serm Suk with F&N in the mid-long term. I am still looking out for another company which can replicate the likeness of Thaibev, to take up 30% of the fund.