LPH – 4QFY17 results seen boosted by ex-gain of Bt47mn February 8, 2018 581
4QFY17 net profit seen at Bt89mn, up 175.6% y‐y and 91.7% q‐q on ex‐gain: We forecast LPH to report a set of healthy results for 4QFY17, largely helped by a one‐off gain on land sale. For the quarter, revenue from hospital operations is estimated at Bt322mn, up 7.7% y‐y but down 5.4% q‐q due to seasonal factors. GPM is forecast at 23.8%, up from 22.8% in 4QFY16 but down from 24.3% in 3QFY17 while SG&A expenses to sales ratio is projected to be 13.8% against 14.0% in 4QFY16 and 12.4% in 3QFY17. On this basis, 4QFY17 core profit is anticipated to come in at Bt42mn, up 30.6% y‐y but down 9.1% q‐q. However, as LPH is expected to book an after‐tax gain of approx Bt94mn on the sale of the 11‐rai land plot, half of which would be booked in 4QFY17 and the remaining half in 1QFY18, 4QFY17 net profit is estimated to be in the neighborhood of Bt89mn, up a healthy 175.6% y‐y and 91.7% q‐q. Based on the above 4QFY17 estimate, its full‐year net profit is forecast to be Bt217mn, up 38.8% y‐y on expectations that revenue from hospital operations will rise 5.9% y‐y to Bt1,284mn. Stripping out ex‐items, FY17 core profit is however expected to grow at a slower pace of 3.1% y‐y to Bt161mn.
FY18 net profit set to rise further by 1.8% y‐y: We expect the positive earnings momentum to continue well into FY18 on the back of further revenue growth driven by capacity expansion and new SSO capitation rates. Our forecast assumes FY18 revenue from hospital operations will inch up 7.7% y‐y to Bt1,383mn, aided largely by (i) capacity expansion through the opening of the new building in Jan 2018, the renovation of existing building and the launch of seven new excellent centers, bringing the total to nine, and (ii) the full‐year benefit of an increase in SSO capitation rates. Costs tend to be high during the initial operation of the new building. GPM is therefore likely to narrow to 23.0% but the impact could be offset by better revenue from its subsidiary AMARC, income from private fund and the above one‐off gain on land sale. On balance, we expect its core profit to increase 8.0% y‐y to Bt174mn and net profit to rise 1.8% y‐y to Bt221mn for FY18.
‘BUY’ rating with FY18 target price of Bt9.50/share: We repeat our ‘BUY’ recommendation on LPH with a FY18 target price of Bt9.50/share on view that the recent share price correction on earnings concerns looks a bit overdone, leaving plenty of upside from the current trading levels.