Ladprao General Hospital (LPH): 3QFY17 profit seen up 7.1% y-y and 38.3% q-q November 1, 2017 789

3QFY17 profit seen at Bt47mn, up 7.1% y‐y and 38.3% q‐q: We expect LPH to report a healthy set of results in 3QFY17 helped by growing revenue and better margins. For the quarter, revenue from hospital operations is projected to come in at Bt341mn, up 6.4% y‐y and 9.4% q‐q thanks largely to a high seasonality, a longer rainy season than a year earlier and an increase in SSO capitalization rates effective Jul 1, 2017. GPM is estimated at 27.5%, up from 26.2% and 22.8% in 3QFY16 and 2QFY17 respectively but operating expenses tend to stay high as a result of a provision for doubtful debts for social security scheme in FY13 and pre‐operating expenses for the opening of the new building which has been pushed back to Feb 2018 from Sep 2017. On this basis, we estimate LPH will achieve 3QFY17 profit of Bt47mn, up 7.1% y‐y and 38.3% q‐q.

FY17 net profit set to rise 37.0% y‐y: For the whole of FY17, we expect LPH to deliver exceptionally strong net profit growth of 37.0% y‐y to Bt214mn, largely aided by potential after‐tax gain of around Bt94mn on the sale of the 11‐rai land plot, which would be split in half and booked in 4QFY17 and 1QFY16. Stripping out ex‐items, FY17 core profit is estimated to rise 1.4% y‐y to Bt158mn, which has been revised upwards from our previous forecast of Bt149mn to reflect lower than expected earnings pressure from the delayed opening of the new building. For 4QFY17, earnings are expected to be better than what it achieved in 4QFY16 but weaker than the level seen in 3QFY17 due to low seasonality.

‘BUY’ rating intact with FY18 target price of Bt9.50/share: Rolling forward our valuation base year to FY18, we nudge our DCF‐derived target price for LPH lower to Bt9.50/share, based on WACC of 6.6% and terminal growth of 3.0%, but our ‘BUY’ rating remains intact on view that much of the earnings concerns appear to have already been largely discounted into the share price.

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