October 13, 2015
Mitra Keluarga Company Focus
Patricia Gabriela (
[email protected])
Titan in medical industry Initiate coverage on MIKA with BUY We initiate our coverage on MIKA with a Buy on the back of: 1) Best profitability among listed hospital (38% 2016F ROE) that we expect to rise further, 2) Good GCG with strong dividend commitment (expect > 90% dividend payout ratio in foreseeable future), and 3) Upside on patient volumes if CoB program rolls out faster than expected. MIKA also offers attractive 3.6% FCF yield for 2016F, better than other big caps with defensive qualities i.e. UNVR (2.4%) and HMSP (2.9%). Concentrating in Jakarta and Surabaya MIKA concentrates on Jakarta and Surabaya, which together combined for ~25% of Indonesia’s GDP despite only 19% of population, implying high concentration of high-income earners. We expect MIKA to be able to grow its revenue per in-patient days by 11% per annum, which is the most important earnings growth driver. Upside in patient volume if CoB program is successful MIKA’s patient volume posted 7% CAGR 2009-14 for both inpatient and outpatient. We are conservative in assuming only 1% CAGR in 2015-17 due to BPJS cannibalization, but the new CoB (Coordination of Benefit) program in 3 of its hospitals should help in long-term. CoB is a new program that combines private insurance and BPJS schemes. Benefiting from owned land Owning its own land help in several ways: 1) Higher operating margin (rental fee can be 1-3% plus possible profit sharing), 2) Lower risk of higher rental cost when time comes to renew rental agreement (either due to rising property price or hospital being a success), and 3) More flexibility in making changes to current building structure (or brownfield expansion). Valuation: BUY with TP of Rp 31,500 We recommend MIKA at Rp 31,500 using DCF method (WACC of 13%, LTG of 5%). Our TP implies 2016-17F EV/EBITDA of 50.6x and 42.7x, and FCF yield of 2.56x and 3.01x respectively. MIKA will do a 1:10 stock split effective this Friday.
PT Mitra Keluarga Karyasehat Tbk is one of the largest private hospital groups in Indonesia with 25 years of brand heritage.
Buy
Rp 31,500
Company Update Share Price Sector Price Target
Rp 28,200 Healthcare Rp 31,500 (+12%)
Stock Data Reuters Code Bloomberg Code Issued Shares Mkt Cap. (Rpbn) Avg. Value Daily 6 Month (Rpbn) 52-Wk range
MIKA.JK MIKA.IJ 1,455 41,033 55.9 32300 / 17000
Major Shareholders Lion Investment Partners B.V., Belanda PT Griyainsani Cakrasadaya
49.7% 32.3%
Public
18%
Consensus Core EPS Consensus (Rp) TRIM vs Cons. (%)
16F 493 -7.6
17F 596 -12.4
Companies Data Year end Dec Sales (Rp bn) EBITDA (Rp bn) Net Profit (Rp bn) EPS (Rp) EPS Growth (%) DPS (Rp) BVPS (Rp) EV/EBITDA (x) P/E (x) Div Yield (%)
2013
2014
2015F
2016F
2017F
1,742 558 399 288 38% 11 1,255 67.9 97.8 0.0
1,946 666 517 374 30% 340 1,307 57.1 75.4 1.2
2,156 749 578 397 6% 365 1,172 53.6 71.0 1.3
2,441 893 662 455 15% 410 1,217 45.2 62.0 1.5
2,766 1,063 760 523 15% 444 1,296 38.2 54.0 1.6
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Stock Price 3 5 ,0 0 0
A v g . 5 D a y M A T r a d in g V a lu e ( R H S )
P ric e ( L H S ) (R pbn ) 1 .2
3 0 ,0 0 0
1 .0
2 5 ,0 0 0
0 .8
2 0 ,0 0 0 0 .6 1 5 ,0 0 0 0 .4
1 0 ,0 0 0
0 .2
5 ,0 0 0 M a r- 1 5
0 .0 M a y -15
J u l- 1 5
S e p -1 5
COMPANY FOCUS
1
Largest private hospitals by patient volume In Dec’14, MIKA’s number of patient reached 2mn, making it as the largest private hospital in Indonesia in terms of patient volume. The number is higher by 6% compared to peers, albeit MIKA only operated 11 hospitals at that time. We view that MIKA’s patient volume will be slightly declined as slow down still persists since 2H14. However, the new CoB program issued by Government in 3 of its hospitals (Kemayoran, Depok, and Bekasi) could act as a remedy for its loss due to BPJS program; though the effect is still more of a long term. Need to remind that MIKA does not accept patient from BPJS in its hospitals. We expect CoB program to help boost MIKA’s traffic in 2016F, but in a moderate rate considering MIKA’s slow expansion. Furthermore, we still wait for the actual CoB scheme proposed by private insurance. As of now, there are only 8 private insurances participating.
Figure 1. MIKA’s number of patients Inpatient days 2,000,000 1,500,000 1,000,000 500,000
Outpatient visits
1,620,447 1,661,977 1,597,4401,629,389 1,571,744 1,476,149 1,314,163 1,225,821 1,089,617 392,408 382,128 380,500 388,110 396,373 256,435 303,113 317,295 350,757
2009
2010
2011
2012
2013
2014
2015F
2016F
2017F
Source: TRIM Research
MIKA’s high number in patient volume is supported with its number of operating beds, efficiency per doctor, and low ALoS (average length of stay) which then boost its revenue intensity. MIKA’s number of operating beds reached 1,726 as of 1H15 (+5% QoQ) and expected to reach 2,000 in 2018F through brownfield expansion. By brownfield expansion, it means through conversion of existing floor, additional floor, and change of room configuration.
Figure 2. MIKA’s operational beds 2,000 1,500
1,484
1,489
1,484
2011
2012
2013
1,647
1,700
1,751
1,804
2014
2015F
2016F
2017F
1,000 500 Source: TRIM Research PT Trimegah Securities Tbk - www.trimegah.com
COMPANY FOCUS
2
Figure 3. Inpatient days per doctor 450 400 350 300 250 200 150 100 50 -
386 307 270
MIKA
Hospital A
Hospital B
Source: TRIM Research
Figure 4. Outpatient visits per doctor 1,800 1,600 1,400 1,200 1,000 800 600 400 200 -
1,638
1,063 686
MIKA
Hospital A
Hospital B
Source: TRIM Research
Figure 5. Average length of stays 5.0 4.1 4.0
4.4
3.6
3.0 2.0 1.0 MIKA
SILO
National average
Source: TRIM Research
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COMPANY FOCUS
3
Proven profitability line track MIKA’s top line and bottom line has grew strong in the past years with CAGR 2009-14 of 15% and 26% respectively. MIKA opened its hospitals in Greater Jakarta and Surabaya areas, thus ensuring its high occupancy rate in a short time. MIKA’s occupancy rate is ~65%, compared to its closest peer at ~58%. On top of that, MIKA’s new hospitals can achieve positive EBITDA within 6 months of commencing; net income breakeven within 1 year thanks to its strategic geographical areas. MIKA also tries to provide more complex and high ticket services to improve its top line, e.g. through surgery and specialists center. MIKA persistently books margin growth on the back of its standardized procurement. MIKA currently limits its drugs and medical supplier into 4-5, in order to achieve economies of scale. As of now, around 80% of its procurement is already standardized. To further support its standardized procurement, MIKA applies, especially in new hospitals, tablets for doctor to write their prescription; aside to record patients data electronically. The eprescription will then accessed by the pharmacies in hospital who will fill the prescription manually for patient. This way, management can better identify what medicine is used for certain diseases.
Figure 6. MIKA’s revenue Inpatient
Outpatient 1,825.24
2,000.00 1,500.00 1,000.00
992.04
818.21
500.00
1,422.08
664.64
569.26
483.35
385.18
1,280.87
1,172.82
1,610.08
733.82
830.83
940.67
2011
2012
2013
2014
2015F
2016F
2017F
Source: TRIM Research
Figure 7. MIKA’s net income Net profit
Net margin (%)
30.0% 26.6%
25.0% 20.0%
26.8%
27.5%
22.9% 18.6%
800.00 600.00
19.6%
15.0% 10.0% 5.0%
27.1%
224.25
288.99
2011
2012
398.65
517.00
577.86
2014
2015F
662.32
760.35
400.00 200.00
0.0%
2013
2016F
2017F
Source: TRIM Research
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COMPANY FOCUS
4
Owning most of its own land presents lower risk to future cash flow MIKA owns land at 11 of its 12 existing hospitals (only land of its Kemayoran hospital is rented) and management’s strategy of owning its own land when possible is likely to continue, as MIKA has already acquired land necessary to build 4 out of its 6 greenfield hospitals. Owning its own land help in several ways: 1) Higher operating margin (rental fee can be 1-3% plus possible profit sharing), 2) Lower risk of higher rental cost when time comes to renew rental agreement (either due to rising property price or hospital being a success), and 3) More flexibility in making changes to current building structure (or brownfield expansion). Note that MIKA’s hospital in Kemayoran should face little or no problem in renewing contract (currently in progress) with management guiding similar fees. There was an issue of local government planning to build an athlete dormitory in the area but according to management, this is no longer an issue as hospital is categorized as public services and therefore unaffected by the development. According to company, the market value of all land it currently owns is Rp1.8tr, which is 4% of MIKA’s market cap.
Figure 8. MIKA’s ROIC 70.0% 55.6%
60.0% 50.0%
59.3%
62.1%
62.4%
64.0%
2013
2014
2015F
2016F
58.2%
47.6%
40.0% 30.0% 20.0% 10.0% 0.0% 2011
2012
2017F
Source: TRIM Research
Figure 9. Value of land portfolio 2,000
1,815
1,500 1,000 500 154 Book value (Sep'14)
Mark to market value
Source: TRIM Research
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COMPANY FOCUS
5
Financials
Figure 10. Income statement Income estimate (Rp bn) Total patient volume:
2013
2014
2015F
2016F
2017F
1,964,152
2,002,575
1,977,940
2,017,498
2,058,349
392,408
382,128
380,500
388,110
396,373
1,571,744
1,620,447
1,597,440
1,629,389
1,661,977
Per inpatient days
3.0
3.4
3.7
4.1
4.6
Per outpatient visits
0.4
0.4
0.5
0.5
0.6
Net sales:
1,742
1,946
2,156
2,441
2,766
Inpatient
1,173
1,281
1,422
1,610
1,825
569
665
734
831
941
(1,005)
(1,081)
(1,174)
(1,307)
(1,451)
Drugs and medical supplies
(577)
(631)
(665)
(736)
(828)
Salary and employee benefits
(188)
(220)
(253)
(283)
(311)
Medical support services
(86)
(75)
(82)
(93)
(94)
Inpatient rooms
(59)
(60)
(62)
(67)
(73)
Depreciation of fixed assets
(46)
(45)
(60)
(71)
(86)
Outpatient
(39)
(38)
(36)
(36)
(36)
(9)
(13)
(18)
(21)
(23)
Gross profit
737
865
982
1,134
1,315
EBIT
482
586
656
781
928
EBITDA
558
666
749
893
1,063
Net profit
399
517
578
662
760
Inpatient days Outpatient visits
Revenue (in mn Rp):
Outpatient
COGS:
Repairs and maintenance
Source: TRIM Research
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COMPANY FOCUS
6
We estimate MIKA to deliver net profit CAGR 2015-18F of 11%, on the back of 10% CAGR revenue growth. We have taken into account BPJS effect towards MIKA’s patient volume. Nevertheless, MIKA still has ample rooms to increase its revenue per inpatient and outpatient. We forecast MIKA’s revenue per inpatient and outpatient to grow CAGR 2015-18F of 8% (vs CAGR 2011-14 of 7-9%).
Figure 11. Margin outlook (%) 2013
2014
2015F
2016F
2017F
Gross profit
42.3%
44.4%
45.5%
46.5%
47.6%
Operating profit
27.0%
28.0%
29.6%
31.2%
32.8%
EBITDA
32.1%
34.2%
34.8%
36.6%
38.4%
Pretax profit
30.4%
34.3%
34.5%
34.7%
35.1%
Net profit
22.9%
26.6%
26.8%
27.1%
27.5%
Source: TRIM Research
MIKA offers a better profitability compared to competitors thanks to its efficiency strategy. MIKA has a demanddriven expansion strategy which ensures its fast occupancy rate, hence efficiency can be achieved in a short time. It also has standardized facility design, operating processes, and branding which allows efficient roll-out at a lower cost compared to competitors. We expect MIKA to further expand its margin as the result of standardized procurement in more hospitals. A slower growth of EBITDA in 2015F, if you do notice, is the result of extraordinary gain in FY14.
Figure 12. Balance sheet Rp bn Cash
2013
2014
2015F
2016F
2017F
1,108
970
857
663
438
Receivables
122
148
133
151
171
Inventories
40
39
43
48
53
Fixed assets
598
771
961
1,207
1,529
Others
266
229
67
67
67
2,134
2,157
2,061
2,135
2,258
Loan
50
-
-
-
-
Payables
89
90
95
103
112
Others
260
261
261
261
261
Total liability
399
350
356
364
373
1,735
1,806
1,705
1,771
1,885
Total assets
Total equity Source: TRIM Research
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COMPANY FOCUS
7
MIKA has a healthy balance sheet and free from debt, unlike its competitor. Along with a strong cash flow, company plans to increase its dividend payout ratio for 2015F.
Figure 13. MIKA’s FCF 1,600
1,379
1,400
1,174
1,200 1,000
966
989
2014
2015F
2016F
91%
92%
90%
2014
2015F
2016F
807
800 600 400 200 2013
2017F
Source: TRIM Research
Figure 14. MIKA’s dividend payout ratio 100%
85%
80% 60% 40% 20% 4% 0% 2013
2017F
Source: TRIM Research
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COMPANY FOCUS
8
Valuation We initiate MIKA with BUY rating at target price of Rp 31,500, +12% upside from current price. We are optimist with MIKA as the company has high profitability line and the sector is still underpenetrated. Albeit the valuation is a bit too much, but MIKA offers a high ROIC of ~64% in 2016F, compared with SILO at 12% and RFMD at 13%. We value MIKA using DCF methodology, with WACC of 13%. Our TP implies 2016-17F EV/EBITDA of 50.6x and 42.7x, and FCF yield of 2.56% and 3.01%. MIKA’s historical forward FCF yield is 3.5%, higher than HMSP at 2.9% and UNVR at 2.4%.
Figure 15. DCF calculations 2016F
2017F
2018F
2019F
2020F
2021F
2022F
2023F
2024F
2025F
EBIT
781
928
1,084
1,260
1,472
1,740
2,051
2,411
2,827
3,309
EBIT (1-T)
626
744
869
1,009
1,180
1,394
1,643
1,931
2,265
2,651
Depreciation
112
134
163
190
207
227
248
272
298
326
13
29
48
69
93
122
156
195
239
290
Capex
(357)
(457)
(562)
(541)
(355)
(390)
(429)
(472)
(519)
(571)
FCFF (Rp bn)
1,174
1,379
1,601
1,986
2,597
3,093
3,669
4,337
5,110
6,005
Discounted FCFF
1,174
1,225
1,264
1,392
1,618
1,711
1,803
1,893
1,982
2,069
Net working capital
Terminal value
83,311
PV of terminal value
28,705
Total company value
44,837
Net debt
(663)
NAV
45,500
NAV / share
31,270
Source: TRIM Research
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COMPANY FOCUS
9
Income Statement (Rpbn)
Balance Sheet (Rpbn)
Year end Dec
2013
2014
2015F
2016F
2017F
Revenue Revenue Growth
1,742 18.1%
1,946 11.7%
2,156 10.8%
2,441 13.2%
2,766 13.3%
Gross Profit
737
865
982
1,134
1,315
Opr. Profit
470
545
638
762
907
EBITDA EBITDA Growth (%)
558
666 19.2%
749 12.5%
893 19.1%
1,063 19.0%
Net Int Inc/(Exp)
48
80
87
67
42
Gain/(loss) Forex
5
2
2
2
2
Other Inc/(Exp)
7
40
16
18
20
530
667
743
848
971
(118) 13
(133) 17
(148) 17
(169) 17
(193) 17
Extra. Items Reported Net Profit
412
534
595
680
778
Core Net Profit
399
517
578
662
760
Pre-tax Profit Tax Minority Int.
Growth (%) Dividend per share
2014
2015F
2016F
2017F
1,108
970
857
663
438
303
220
209
231
257
Net fixed asset
598
771
961
1,207
1,529
Other asset
125
196
34
34
34
2,134
2,157
2,061
2,135
2,258
Total asset ST debt Other curr liab
50
-
-
-
-
231
205
211
219
228
LT debt Other LT Liab Minority interest Total Liabilities Shareholders Equity Net debt / (cash)
29.7%
11.8%
14.6%
14.8%
11
340
365
410
444
Net Working capital
3033.3%
7.5%
12.1%
8.4%
91%
92%
90%
85%
4%
2013
Other curr asset
37.9%
Cash Flow (Rpbn) Year end Dec
Cash and equivalents
Total cap employed
growth (%) Dividend payout
Year end Dec
-
-
-
-
-
118
145
145
145
145 (84)
45
63
(84)
(84)
399
350
356
364
373
1,735
1,806
1,705
1,771
1,885
(1,058)
(970)
(857)
(663)
(438)
1,853
1,951
1,850
1,916
2,030
1,130
984
855
676
467
50
-
-
-
-
2013
2014
2015F
2016F
2017F
Debt
Key Ratio Analysis
2013
2014
2015F
2016F
2017F
Year end Dec
399
517
578
662
760
Profitability
Depr / Amort
77
79
94
112
134
Gross Margin (%)
42.3%
44.4%
45.5%
46.5%
47.6%
Chg in Working Cap
63
(49)
31
(15)
(17)
Opr Margin (%)
27.0%
28.0%
29.6%
31.2%
32.8%
EBITDA Margin (%)
32.1%
34.2%
34.8%
36.6%
38.4%
Core Net Margin (%)
22.9%
26.6%
26.8%
27.1%
27.5%
ROAE (%)
26.0%
29.2%
32.9%
38.1%
41.6%
ROAA (%)
20.9%
24.1%
27.4%
31.6%
34.6%
Net Profit
Others CF's from oprs
21
4
539
547
702
759
878
Capex
(147)
(169)
(284)
(357)
(457)
Others
(76)
9
-
-
-
(223)
(160)
(284)
(357)
(457)
(15)
(470)
(532)
(596)
(646)
CF's from investing Dividend Others CF's from financing
Stability Current ratio (x)
5.0
5.8
5.1
4.1
3.1
Net Debt to Equity (x)
(0.6)
(0.5)
(0.5)
(0.4)
(0.2)
1
(56)
-
-
-
Net Debt to EBITDA (x)
(1.9)
(1.5)
(1.1)
(0.8)
(0.4)
(14)
(526)
(532)
(596)
(646)
Interest Coverage (x)
31.0
38.3
58.7
70.1
83.5
Net cash flow
301
(138)
(113)
(194)
(225)
Efficiency
Cash at BoY
802
1,108
970
857
663
A/P (days)
30
30
29
28
27
Cash at EoY
1,108
970
857
663
438
A/R (days)
25
25
24
21
21
807
966
989
1,174
1,379
Inventory (days)
15
13
13
13
13
Free Cashflow
Interim Result (Rpbn)
Capital History
2Q14
3Q14
4Q14
1Q15
2Q15
Sales
507
-
-
541
561
Gross Profit
222
-
-
248
258
EBITDA
166
-
-
191
196
Opr. Profit
133
-
-
166
168
Net profit
129
-
-
151
171
-
-
-
145
165
Gross Margins (%)
43.7%
-
-
45.7%
46.0%
EBITDA Margins (%)
32.7%
-
-
35.2%
34.9%
Opr Margins (%)
26.2%
-
-
30.6%
30.0%
Net Margins (%)
25.5%
-
-
27.9%
30.4%
-
-
-
26.8%
29.4%
Core profit
Core Margins (%)
PT Trimegah Securities Tbk - www.trimegah.com
Date 24-Mar-15
IPO@Rp17,000
COMPANY FOCUS
10
PT Trimegah Securities Tbk Gedung Artha Graha 18th Floor Jl. Jend. Sudirman Kav. 52-53 Jakarta 12190, Indonesia t. +62-21 2924 9088 f. +62-21 2924 9150 www.trimegah.com
DISCLAIMER This report has been prepared by PT Trimegah Securities Tbk on behalf of itself and its affiliated companies and is provided for information purposes only. Under no circumstances is it to be used or considered as an offer to sell, or a solicitation of any offer to buy. This report has been produced independently and the forecasts, opinions and expectations contained herein are entirely those of Trimegah Securities. While all reasonable care has been taken to ensure that information contained herein is not untrue or misleading at the time of publication, Trimegah Securities makes no representation as to its accuracy or completeness and it should not be relied upon as such. This report is provided solely for the information of clients of Trimegah Securities who are expected to make their own investment decisions without reliance on this report. Neither Trimegah Securities nor any officer or employee of Trimegah Securities accept any liability whatsoever for any direct or consequential loss arising from any use of this report or its contents. Trimegah Securities and/or persons connected with it may have acted upon or used the information herein contained, or the research or analysis on which it is based, before publication. Trimegah Securities may in future participate in an offering of the company’s equity securities.
