3 Thai Hospital Stocks Rally in Response to the Emergence of Omicron Strain

Three Thai hospital stocks rallied on Monday as sentiment on the new wave of COVID-19 rose. Hospitals are once again seeing an increase in demand for their services, as the Omicron strain has been found in several countries across the world, especially in Europe.

As of 15.41 hrs. local time in Thailand, the share price of Bangkok Chain Hospital Public Company Limited (SET: BCH) rose THB1.20/share or 5.74% to THB22.10/share, with a trading value of THB1,171 million.

The share price of Ekachai Medical Care Public Company Limited (SET: EKH) rose THB0.35/share or 4.43% to THB8.25/share, with a trading value of THB110 million.

The share price of Chularat Hospital Public Company Limited (SET: CHG) rose THB0.10/share or 2.63% to THB3.90/share, with a trading value of THB593 million.

Capital Nomura Securities (CNS) anticipates the SET Index will fall below the 1,600-point support level this week as the World Health Organization had declared the Omicron as a “variant of concern”. Thus, CNS suggests mid-sized hospital stocks (BCH, CHG), export stocks (KCE), and COVID-19 plays (XO, STGT) for short-term investment.  

KTBST Securities (KTBST) holds a BUY rating on BCH and a target price of THB28.00 based on DCF, assuming WACC of 7.1% and terminal growth of 3%. KTBST has an increasing view of 2022E earnings outlook, which should achieve its forecast on the back of strong organic growth. KTBST forecasts revenue to grow 30% from the pre-outbreak level in 2020 with revenue from the social security office to rise +5% (an average of THB3,400 per person in 9M21) after the company has increased a quota for patients under the social security welfare by 24%. The company, moreover, has established a laboratory to save costs by approx. THB20.0 million per year. 

KTBST maintains 2021E/2022E net profit forecast at THB4.96 billion (+303% YoY)/THB1.61 billion (-68%). In 4Q21E, earnings are expected to soften given the eased COVID-19 situation. There is an upside to 2021E forecast as 1) the number of diabetic patients from the Middle East has gradually improved, and 2) the company has anticipated 1.0 million doses of Moderna vaccines, amounting to THB1.6 billion.

Finansia Syrus Securities (FSS) has given a “BUY” recommendation on Ekachai Medical Care Public Company Limited (EKH) with a target price at THB9.40/share.

FSS stated that even though the Covid-19 situation is subsiding, 4Q21 earnings are still expected to outperform compared to the same period of last year. Primarily, FSS estimated earnings to be in the same level of 2Q21 in which profits grew 289% YoY with an upside of around 14%.

FSS stated that EKH is a good stock to invest in during the new wave of omicron variants. If the new variant can be controlled, FSS expects EKH’s IVF business to recover and support the revenue in the next phases.