Medical tourism, ageing Thais create US$13b hospital empire

[BANGKOK] A Thai hospital operator’s s have surged so much this year that it’s now the most-valuable such business in any emerging market.

Bangkok Dusit Medical Services Pcl’s s have risen 29 per cent in 2018, supported by rising demand from Thailand’s ageing population as well as an increase in medical tourism. That pushed its market value to US$13 billion, surpassing Malaysia’s IHH Healthcare Bhd, to take the mantle of largest developing-nation company in the industry.

And despite the rally, investors believe the s 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 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’s 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 2018 from a year ago, according to KT Zmico Securities Co. The four largest markets were Japan, China, the UK and Myanmar. Growth from China was 30 per cent in the same period.

Perhaps the stock’s rally isn’t surprising since the company’s chief executive officer also controls an airline and airport, and Thailand is on track for a record influx of foreign tourists in 2018. Prasert Prasarttong-Osoth is a doctor who has also developed a tourism empire that includes Bangkok Airways Pcl and Samui Island’s international airport. That expertise in travel, logistics and demographics is paying off as the country copes with more elderly and draws more tourists.

Bangkok Dusit operates 45 hospitals under six brands in Thailand with a combined 8,000 b. Much of its expansion has come through acquisitions, including hospitals and “wellness centres” in resort hubs such as Phuket and Samui. The company’s s 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’s 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 isn’t a good sign and investors should wait for good valuations before buying the stock, Bualuang Securities Pcl said in a 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.