Equity Analysis /
Thailand

Bangkok Dusit Medical Services PCL: Is the market too bullish on BDMS?

  • Further investments; next heavy CAPEX cycle?

  • Unattractive 2Q22 low season profit

  • Our forecast upgraded, but the street is still too bullish

Phoowadol Phoosodngern
Bualuang Securities
14 June 2022

We suggest waiting for a good entry level (after the 2Q22 result) before reloading the stock. In the short-term, the stock price will be pressured by market concerns over BDMS’s next heavy CAPEX cycle and downside risk to profit forecasts (the market is optim-istic over 2022 earnings). BDMS trades at expensive PERs of 42.9x for 2022 and 39.3x for 2023 (1SD above long-term mean). Our HOLD call stands to a YE22 target price of Bt26.

Further investments; next heavy CAPEX cycle?

On May 25, BDMS announced that it will build the BDMS Silver Wellness and Residence on a 13-rai land plot leased from the Crown Property Bureau on the corner of Sarasin Road and Langsuan Road. The 30+30-year lease is Bt9.1bn (Bt1.7m/sq.wah), which is expensive. The estimated cost of construction is Bt14.4bn. The project is scheduled to open 2029. BDMS admitted that residential development is not an area where is has any expertise (the firm will engage consultants). The first payment will be Bt2.5bn on the signing of contract in June 2022, using internal cash. We expect the value of fixed assets to rise in 2025, once construction CAPEX has ramped up; we assume that interest expenses will be capitalized.