Medical tourism, ageing Thais drive Bangkok Dusit to top spot

Company's $17.8b valuation makes it the largest in the sector in emerging markets

The Bangkok Hospital is one of 45 hospitals run by Bangkok Dusit Medical Services, whose shares have risen 29 per cent this year and are poised for their fifth straight quarterly gain, the longest rally since 2013. PHOTO: BANGKOK DUSIT MEDICAL SERVICES

BANGKOK • A Thai hospital operator's shares have surged so much this year that it is now the most-valuable such business in any emerging market.

Bangkok Dusit Medical Services shares have risen 29 per cent this year, supported by rising demand from Thailand's ageing population and an increase in medical tourism.

That pushed its market value to US$13 billion (S$17.8 billion), surpassing Malaysia's IHH Healthcare, to take the mantle of largest developing-nation company in the industry.

And despite the rally, investors believe the shares have further room to rise.

"The inadequacies of public healthcare will continue to bolster the earnings growth of Bangkok Dusit" as Thailand's population ages, said Mr Adithep Vanabriksha, Bangkok-based chief investment officer of Aberdeen Standard Investments.

According to the United Nations, the number of Thais aged 60 or over will more than double to 23 million by 2050, or about 37 per cent of the nation's projected population. That is straining the country's government-managed medical facilities, providing more incentives for private operators.

Meanwhile, the country has become the top destination in Asia for medical tourism, owing to its high-quality treatment with reasonable prices as well as many attractions.

Bangkok Dusit's revenue from foreign patients accounted for almost one-third of sales after rising 10 per cent in the first half of this year from a year ago, according to KT Zmico Securities Co.

The four largest markets were Japan, China, the United Kingdom and Myanmar. Growth from China was 30 per cent in the same period.

Bangkok Dusit operates 45 hospitals under six brands in Thailand with a combined 8,000 beds.

Much of its expansion has come through acquisitions, including hospitals and "wellness centres" in resort hubs such as Phuket and Samui.

The company's shares are poised for their fifth straight quarterly gain, the longest rally since 2013.

Still, Bangkok Dusit trades at 39 times of 12-month estimated earnings, exceeding its average of 34 times in the past five years, according to data compiled by Bloomberg. That is more than double the valuation of the benchmark SET Index, which trades at a 15 multiple.

The market's high expectations for the company's earnings growth is not a good sign and investors should wait for good valuations before buying the stock, Bualuang Securities said in an Aug 21 note.

Among securities firms surveyed by Bloomberg, the company has 20 buy ratings, 10 hold and one sell recommendations.

The consensus 12-month target price of 28.39 baht is 5.1 per cent above Tuesday's close.

BLOOMBERG

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A version of this article appeared in the print edition of The Straits Times on August 30, 2018, with the headline Medical tourism, ageing Thais drive Bangkok Dusit to top spot. Subscribe