Bangkok Dusit Medical Services : MD&A Quarter 3/2022

14 November 2022

Bangkok Dusit Medical Services Public Company Limited

MANAGEMENT DISCUSSION AND ANALYSIS

Executive Summary

3Q22 & 9M22 Performance

3Q22 9M22

THB% Chg THB % Chg

1. (YoY) mm (YoY) Operating Income 23,985 19% 69,125 28%

EBITDA	5,999	17%	17,293	40%
Net Profit	3,386	35%	9,493	79%

Remark: YoY means changes comparing to 3Q21 and 9M21

3Q22 Performance

Bangkok Dusit Medical Services Public Company Limited ("Company") and subsidiaries reported consolidated operating income for the third quarter of 2022 ("3Q22") of Baht 23,985 million, an increase of 19% from 3Q21. Key drivers were from higher hospital revenues of 10% YoY from Thai patients and 74% YoY from international patients. The key growth drivers were from recovery of fly-in patients together with return of Thai non COVID-19 patients. These supporting factors helped increase the overall occupancy rate from 71% in 3Q21 to 76% in 3Q22.

The Company and its subsidiaries reported EBITDA of Baht 5,999 million, increased by 17% YoY. EBITDA margin in 3Q22 was similar to 3Q21 at 25.0%. Net profit were Baht 3,386 million, increased by 35% YoY as a result of good revenues growth and high occupancy rate to achieve economy of scale.

9M22 Performance

For nine-month period ended 30 September 2022 ("9M22"), the consolidated operating income were Baht 69,125 million, increased by 28% YoY. In 9M22, there were good growth from COVID-19 related revenues and non COVID-19 revenues which were driven from both Thai and international patients. As a result, overall occupancy rate increased from 57% in 9M21 to 75% in 9M22.

The Company and its subsidiaries reported EBITDA of Baht 17,293 million, increased by 40% YoY resulting in an increase in EBITDA margin from 22.9% in 9M21 to 25.0% in 9M22.

Net profit was Baht 9,493 million, increased by 79% YoY.

Major Development in 3Q22

1. TRIS Rating upgraded the company rating on
   BDMS to "AA+" with a "stable" outlook
   TRIS Rating upgraded BDMS and its senior unsecured debentures rating to "AA+" from "AA", with a "stable" outlook. The upgrades reflect BDMS's better-than-expected operating performance, supported by strong recovery of international patients, its improving efficiency, and enhanced asset utilization. In addition, the ratings reflect BDMS very strong balance sheet and abundant liquidity profile.
2. Grand opening of N Health Novogene Genomic (NNG)
   NNG, the private leading next generation sequencing center in Thailand, had a grand

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opening on 2 September 2022. The company was established by National Healthcare System (N Health), a leading laboratory company in ASEAN region under BDMS group, and Novogene AIT Genomics Singapore Pte. Ltd, the leading commercial provider of genomic services and solutions. NNG will provide comprehensive genomic services covering all applications under collaboration with world class institutes. Its wide ranges of genetic services including prevention, diagnostic and personalized treatment. This aims to enhance the capability of genomic medicine in Thailand for serving Thai and international customers with lower turnaround times and less expenses.

3Q22 Consolidated Financial Summary

Operating Income

(THB mm)	3Q22	3Q21	YoY	QoQ
Hospital operations	22,825	18,873	21%	9%
Sales of goods	875	791	11%	10%
Other income	285	493	(42)%	37%
Total Operating
Income	23,985	20,158	19%	9%

Remark: QoQ means changes comparing to 2Q22.

Operating Income Comparing to 3Q21 (YoY)

In 3Q22, total operating income was Baht 23,985 million, an increase of Baht 3,827 million or 19% YoY, primarily due to

• Revenues from hospital operations were Baht 22,825 million, an increase of Baht 3,952 million or 21% YoY mainly from an increase in Thai patient revenues of 10% YoY and 74% YoY from international patients. As a result, revenue proportion between Thai and international patients changed from 83%:17% in 3Q21 to 76%:24% in 3Q22.

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1. Thai patient revenues: Key growth were from patients with non COVID-19and seasonal communicable disease resulting in 47% YoY increase in overall non COVID- 19 patient revenues offsetting with the decline of COVID-19related revenues of 58% YoY, which was in line with the improving of COVID-19situation in Thailand. Consequently, the portion of COVID-19related revenue to revenue from hospital operations decreased from 25% in 3Q21 to 9% in 3Q22.

o International patient revenues: Key growth was from a recovery of fly-inpatients mainly from CLMV (Cambodia, Laos, Myanmar and Vietnam) patients, Middle East patients and Bangladesh patients especially at our Center of Excellence (CoE).

In addition, outpatient revenues increased 40% YoY due to higher volumes from both Thai and international patients. For inpatient revenues, it increased slightly by 5% YoY due to declining admission of Thai COVID-19 patients despite strong admission growth from international patients during the quarter.

Overall occupancy rate increased from 71% in 3Q21 to 76% in 3Q22 partly from our bed utilization management as COVID-19 situation in Thailand has improved.

	Revenues from hospital			Chg.		% of
	operations in 3Q22			(YoY)	revenues
	Revenues growth from
	hospital operations			21%		100%
	Breakdown by nationality
	Thai	10%	76%
	International	74%	24%
	Breakdown by location
	Bangkok & Vicinity	20%	56%
	Outside Bangkok	22%	44%

Remarks

EBITDA

	Revenues from hospital			Chg.		% of
	operations in 3Q22			(YoY)		revenues
Breakdown by type of patients
	Outpatients	40%	47%
	Inpatients	5%	53%

• Revenues from sales of goods were Baht 875 million, increased by 11% YoY.
• Other incomes were Baht 285 million, decreased by 42% YoY as Mövenpick BDMS Wellness Resort Bangkok temporary closed for renovation since January 2022.

Operating Income Comparing to 2Q22 (QoQ)

In 3Q22, total operating income increased Baht 2,004 million or increased by 9% QoQ. This was due to a good recovery of 14% QoQ from non COVID-19 revenues while a decline of 26% QoQ from COVID-19 related revenues. The portion of COVID-19 related revenues to revenues from hospital operations declined from 13% in 2Q22 to 9% in 3Q22.

Operating Expenses

(THB mm)	3Q22	3Q21	YoY	QoQ
Cost of Hospital
operations and
others	14,979	13,125	14%	6%
Administrative
expenses	4,496	3,514	28%	7%
Total Operating
Expenses (Including
depreciation)	19,475	16,639	17%	6%

Total Operating Expenses Comparing to 3Q21 (YoY)

together with an increase in marketing, utility and other administration expenses.

Total Operating Expenses Comparing to 2Q22 (QoQ)

In 3Q22, the Company and its subsidiaries reported total operating expenses & depreciation increased by 6% QoQ mainly because of higher staff expenses.

Other Major Items

• Finance expenses decreased to Baht 154 million in 3Q22 or decreased by 11% YoY due to redemption of debentures totaling of Baht 3,100 million.
• Corporate income tax in 3Q22 were Baht 824 million, increased from Baht 645 million in 3Q21 due to higher earnings before taxes.

Profitability Analysis

(THB mm)	3Q22	3Q21	%Chg
EBITDA	5,999	5,118	17%
EBITDA margin	25.0%	25.4%
EBIT	4,545	3,535	29%
EBIT margin	18.9%	17.5%
Net profit	3,386	2,509	35%
Net profit margin	14.1%	12.4%
EPS (THB)	0.21	0.16	35%
Weighted average number
of ordinary shares
(mm shares)	15,892	15,892

= Total operating income - Total operating expenses (Excluding depreciation and amortization)

Profitability margin calculated based on operating income

In 3Q22, the Company and its subsidiaries reported total operating expenses & depreciation of Baht 19,475 million, increase of Baht 2,836 million or 17% YoY mainly due to higher doctor fees given the growth in revenue from hospital operations and higher clinical & non clinical staff expenses

The Company and its subsidiaries recorded EBITDA of Baht 5,999 million in 3Q22, increased by 17% YoY. However, EBITDA margin decreased slightly from 25.4% in 3Q21 to 25.0% in 3Q22 mainly due to increasing expenses as a result of rising inflation.

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Net profit of Baht 3,386 million increased by 35% YoY due to higher operating income together with high occupancy rate to achieve the economy of scale resulting in an increase in net profit margin from 12.4% in 3Q21 to 14.1% in 3Q22.

9M22 Consolidated Financial Summary

Operating Income

(THB mm)	9M22	9M21	%Chg
Revenues from hospital
operations	65,966	50,628	30%
Revenue from sales of goods	2,492	2,227	12%
Other income	667	981	(32)%
Total Operating Income	69,125	53,836	28%

In 9M22, total operating income were Baht 69,125 million, an increase of Baht 15,289 million or increased by 28% YoY, primarily due to

• Revenues from hospital operations were Baht 65,966 million, an increase of Baht 15,339 million or increased by 30% YoY. Such increase was mainly from increase in Thai patient revenues of 22% YoY from both COVID-19 related revenues and recovery of non COVID-19 patient revenues. Meanwhile International patient revenues increased 71% YoY mainly from increase of CLMV and Middle East patients. Consequently, revenue proportion between Thai and international patients changed from 82%:18% in 9M21 to 77%:23% in 9M22.
  The COVID-19 related revenues grew 22% YoY while non COVID-19 patient revenues grew faster at 32% YoY in 9M22. Thus, the portion of COVID-19 related revenue to revenue from hospital operations decreased slightly from 14% in 9M21 to 13% in 9M22.

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Both hospitals in Bangkok & vicinity and hospitals outside Bangkok & vicinity increased 31% and 30% YoY, respectively.

The occupancy rate increased from 57% in 9M21 to 75% in 9M22.

	Revenues from hospital		Chg.				% of
	operations in 9M22		(YoY)			revenues
	Revenues growth from
	hospital operations		30%				100%
	Breakdown by nationality
	Thai	22%		77%
	International	71%		23%
	Breakdown by location
	Bangkok & Vicinity	31%		57%
	Outside Bangkok	30%		43%
	Breakdown by type of patients
	Outpatients	34%		47%
	Inpatients	24%		53%

• Revenues from sales of goods were Baht 2,492 million, increased by 12% YoY.
• Other income was Baht 667 million, decreased by 32% YoY as Mövenpick BDMS Wellness Resort Bangkok was temporary closed for renovation since January 2022.

Operating Expenses

(THB mm)	9M22	9M21	%Chg
Cost of hospital operations
and others	43,577	35,937	21%
Administrative expenses	12,721	10,337	23%
Total Operating Expenses
(Including depreciation)	56,298	46,274	22%

In 9M22, the Company and its subsidiaries reported total operating expenses & depreciation of Baht 56,298 million. An increase of Baht 10,024 million or increased by 22% YoY was mainly due to higher doctor fees, drug and medical supply as a result of the growth of revenue from hospital operations together with an increase in staff expenses.

Remarks

EBITDA

Other Major Items

• Finance expenses decreased to Baht 463 million in 9M22 or decreased by 17% YoY due to redemption of debentures during 9M22.
• Corporate income tax in 9M22 were Baht 2,422 million, increased from Baht 1,358 million in 9M21, due mainly to increase in pre-tax profit in 9M22.

Profitability Analysis

(THB mm)	9M22	9M21	%Chg
EBITDA	17,293	12,327	40%
EBITDA margin	25.0%	22.9%
EBIT	12,914	7,637	69%
EBIT margin	18.7%	14.2%
Net profit	9,493	5,300	79%
Net profit margin	13.7%	9.8%
EPS (THB)	0.60	0.33	79%
Weighted average
number of ordinary
shares (mm shares)	15,892	15,892

= Total operating income - Total operating expenses (Excluding depreciation and amortization)

Profitability margin calculated based on operating income

The Company and its subsidiaries recorded EBITDA of Baht 17,293 million in 9M22, increased by 40% YoY resulting in an increase in EBITDA margin from 22.9% in 9M21 to 25.0% in 9M22.

Net profit was Baht 9,493 million, increased by 79% YoY resulting in an increase in net profit margin to 13.7% in 9M22. EPS was Baht 0.60 per share in 9M22.

Assets

(THB mm)	Sep 22	Dec 21	%Chg
Cash & cash equivalents	10,593	10,934	(3)%
Trade & other
receivables	11,062	9,131	21%
Inventories	2,048	2,005	2%
Property, premises &
equipment	79,490	79,689	(0)%
Goodwill	17,539	17,539	0%
Right-of-use assets	2,673	2,862	(7)%
Other assets	10,469	6,294	66%
Total assets	133,875	128,454	4%

As of 30 September 2022, the Company and its subsidiaries reported total assets of Baht 133,875 million, increased by 4% from 31 December 2021. Such increases were mainly from trade & other receivables and other non-current assets.

The Company carried goodwill of Baht 17,539 million, which remain unchanged from 31 December 2021. Goodwill were mainly from acquisitions. Such goodwill is tested for impairment annually and when circumstances indicate that the carrying value may be impaired. However, the Company has considered that this goodwill is not impaired.

Other assets of Baht 10,469 million mainly consisted of (1) other current financial assets which were investment in fixed deposits and mutual funds of Baht 3,214 million, (2) other non-current assets of Baht 3,093 million which mainly were prepayment of long-term land lease for the BDMS Silver Wellness & Residence project of Baht 2,503 million and (3) intangible assets which mainly were computer software of Baht 1,566 million.

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