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SERVICES SECTORS
Health care to remain in good shape Government's populist 30-baht medical programme just one driver of sector with huge potential By CHAROEN KITTIKANYA Thailand's health-care business, particularly among private hospitals, is expected to remain in good shape despite anticipated lower purchasing power among middle-income earners, wavering confidence in the country's economic prospects, and ongoing political instability. ``The overall prospect for the healthcare industry remains favourable, both for state-run hospitals and the private sector, particularly boosted by the greater contribution from the state-subsidised 30-baht health-care scheme and the social security fund,'' said Dr Boon Vanasin, chairman of the unlisted Thonburi Hospital and Piyavate Hospital Group. The 30-baht health programme originally received state subsidy at 1,200 baht per year per head. The subsidy currently stands at 1,659 baht per year per head. The number of Social Security Fund members stands at about four million, with contribution per person averaging 1,700 baht a year. According to Dr Boon, the performance of private hospitals was also expected to remain in good shape, particularly offset by strong contribution from foreign patients, despite lower purchasing power expected among middle-income earners influenced by high fuel-oil prices, inflation, interest-rate hikes, and unfavourable short-term economic prospects.
Health care led all sectors on the SET in terms of one-year total shareholder returns (TSR), at 57.9%. The sector, with market capitalisation of 61.9 billion baht, had three-year TSR of 91.9%, a five-year score of 75%, and a 10-year average of 23.7%. Historically, the sector has grown at a rate of two times that of the country's overall economy. According to Dr Boon, the prospects for provincial hospitals, excluding those located in big cities and tourist spots such as Phuket, Pattaya, and Chiang Mai, were not quite as bright, given that clients had lower incomes than those in Bangkok. Most listed health-care service providers reported an increase in hospital operations and medical services last year, with all, including Udon Thani-based Wattana Karnpaet (NEW), the smallest firm in the sector by market capitalisation which reported a net loss last year, posting net profits accordingly. Bumrungrad Hospital (BH), which focuses mostly on affluent local and foreign patients, saw strong profits last year of 1.05 billion baht, a rise from 934.54 million baht in 2004, mainly as a result of continuous growth in hospital revenue. BH had total revenue of 6.807 billion at the end of 2005, a rise of 17% from 998 million baht in 2004. The increase is mainly the result of the continuous growth in hospital operations, where inpatient revenue increased by 13%, while outpatient revenues increased by 17%. BH last year treated an estimated 400,000 foreign patients, with domestic patients exceeding 700,000. BH prospects are considered very strong, with one-year TSR topping 100.3%, entrenched by recent partnerships with investors from Singapore and the United Arab Emirates to expand the company's businesses outside Thailand. Temasek Holdings and Dubai-based Istithmar PJSC each invested in January to take a 5.94% stake in BH. According to Carl Stanifer, group chief financial officer, additional investments by the new partners would particularly enable Bumrungrad International to actively pursue additional projects throughout the region, in areas such as China, the Middle East, Malaysia and India.  Bumrungrad has already invested US$9.2 million in a 40% stake in Manilabased Asian Hospital, and $9.7 billion for a 49% holding in a new hospital in Dubai, together with Istithmar. However, based on TSR for three years, Bangkok Dusit Medical Services (BGH) has particularly strong prospects. It currently has more than 15 hospital chains under three strong brands -- Bangkok Hospital, Samitivej, and BNH. The firm, with market capitalisation worth 27.57 billion baht, had three-year total shareholder returns of 110.1%, a significant rise from 48% for one-year TSR. The company last year came second, measured by net profit worth 832.1 million baht, a growth of 33.5% from 623.15 million baht in 2004. The company and its subsidiaries generated a substantial increase in revenue from hospital operations worth a total 10.25 billion baht, a 94.4% rise from 5.28 billion in 2004. Total revenue was reported at 10.72 billion baht, a rise from 5.63 billion baht, partially due to an expansion of specialised services including the opening of Bangkok Heart Hospital, and shareholder restructuring, in which BGH acquired additional subsidiaries including Samitivej Public Co Ltd, BNH Medical Center Co Ltd and Wattanavej Co Ltd. Thanks to the central purchasing system, the cost of patient service in 2005 was slightly up, to only 57.9%, compared with 56.9% in 2004. The central purchasing system also played a part in driving BGH's listed subsidiary Samitivej's (SVH) profitability, last year worth 109.84 million baht, a drop from 265.21 million baht in 2004. The company has attempted reversal of loss through revaluation of land worth of 228.05 million baht. But in terms of patient services, Samitivej, once loss-ridden, saw an increase in total revenue in 2005 to 2.97 billion baht, from 2.6 billion baht in 2004. The growth was primarily attributed a sharp rise in patient service revenue, reported at 2.78 billion baht, compared with 2.28 billion baht in 2004. Probably because of huge investment in medical equipment, the company has one-year TSR at -17.6%, but in the longerterm, over the next three years, the company's TSR is expected to increase to 35.2%. According to its executives, BGH has targeted to expand its network, including the Samitivej brand, to 20 hospitals over the next five years, particularly in strategic locations within a 250-300 km radius of Bangkok, in line with medical-services liberalisation, either through acquisitions or establishing new hospitals. Apart from its network, BGH is also a strong investor in the health-care sector. BGH is currently the largest shareholder in SET-listed Ramkhamhaeng Hospital (RAM), holding a majority of 19%. Ramkhamhaeng Hospital operates 10 facilities. With market capitalisation of 3.16 billion baht, RAM has one-year TSR of 24.8%, 62.3% for three years, 88.8% for five years and 25.2% for 10 years. It last year reported a profit of 230.09 million baht, a drop from 286.136 million baht on revenues worth a total of 1.97 billion baht, a rise from 1.71 billion baht. ``Networking is a key strategy for us to enable the group to grow in the long run,'' said Dr Chatree Duangnet, Bangkok Hospital Group's chief operating officer.
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