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Bangkok Dusit Medical Plc

Buy on weakness

Bangkok Dusit Medical Plc (BGH)

BGH is raising fund through B10bn convertible bonds issuance and

475 million shares allocation (General Mandate) for further

investment including seven new acquisition deals, helping to increase

business value albeit 4.76% dilution effect. Buy on weakness.


- Raise fund to support CD and General Mandate

BGH's Board resolved to approve the reduction of the registered capital from

B1,704m to B1,549m, equivalent to the paid-up capital, and the increase in

the registered capital by issuing 1,006.9 million ordinary shares at the par

value of B0.10 each, mounting the total registered capital to B1,649.79m. The

fund raising is meant to facilitate 1) the issuance and offering of convertible

bonds (CD) in the amount of not exceeding B10bn, with the term of not more

than five years from the issue date, the conversion period of approximately

40 days after the issue date to 10 days before the maturity date, and the

conversion price calculated by reference to the market price of BGH's shares

traded on the SET during the period before the price determination plus

premium and 2) allocation of up to 474.7 million shares (General Mandate);

2.1) up to 232.4 million shares will be offered on a public offering basis and

2.2) up to 232.4 million shares will be offered on a private placement basis.

The allocation of the newly issued ordinary shares in 2.1) or 2.2) or both shall

not exceed 1.5% of the paid-up registered capital or totaling not exceed

232.4 million shares.

- Get ready for future acquisition

The convertible bond issuance of not exceeding B10bn is a source of low-rate

loan for BGH. In case that convertible bonds are exercised, the conversion

price will be higher than the market price. The dilution effect from all

conversion is low at only 3.33%, while the dilution effect from the General

Mandate of up to 232.4 million shares is not over 1.43%. In addition, looking

back, General Mandate was usually used for a share swap between BGH and

the companies BGH had acquired. At present, BGH has planned to possess 50

hospitals in total by the end of next year; 34 hospitals are currently providing

services (including three newly acquired hospitals from Sanamchan Hospital

group), nine hospitals are ready to open or under a construction process,

totaling 43 hospitals, and seven other acquisition deals remain unveiled. The

fund raising through the convertible bond issuance and the General Mandate

would support the purchase or acquisition of the seven new hospitals to

enlarge BGH's income and profit base in the long run.

- Buy on weakness

The current share price provides only 8.7% upside from 2014 fair value, DCF,

of B17.5, while there is a panic sale from the capital increase news. We

recommend buying when the price weakens.


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