Bumrungrad Hospital Public : Management Discussion and Analysis Yearly Ending 31 Dec 2017

Ref: SET 61/04

22 February 2018

Subject: Management Discussion and Analysis for the fourth quarter 2017 results and 2017 results

To: Directors and Manager The Stock Exchange of Thailand

Bumrungrad Hospital PCL.

Management Discussion and Analysis for Consolidated 4Q17 and 2017 results

22 February 2018

Summary

The Company reported Total revenues in 4Q17 of Baht 4,665 million, a 6.4% improvement from 4Q16 revenues of Baht 4,385 million. Net profit for 4Q17 grew 11.9% to Baht 923 million from Baht 825 million in 4Q16, with Net profit margin at 19.8% in 4Q17 compared to 18.8% in 4Q16.

Total revenues for 2017 increased to Baht 18,527 million, or 2.2% more than Baht 18,126 million in 2016. Net profit rose 8.8% to Baht 3,944 million in 2017 from Baht 3,626 million in 2016, with Net profit margin at 21.3% in 2017 compared to 20.0% in 2016.

Details of the management discussion and analysis follow:

Quarterly Operational Performance

The Company reported Revenues from hospital operations of Baht 4,598 million, a 6.5% improvement year-over-year from Baht 4,317 million in 4Q16. This was mostly due to the increase in revenues from Thai and non-Thai patients by 4.1% and 7.3%, respectively. As a result, the revenue contribution from Thai patients in 4Q17 was 36.6% and from non-Thai patients was 63.4%, compared with 37.3% and 62.7%, respectively, for 4Q16.

The Company reported Cost of hospital operations (including Depreciation and amortization) of Baht 2,689 million for 4Q17, or 4.5% more year-over-year from Baht 2,573 million in 4Q16. This represents a favorable change when compared to the 6.5% growth in Revenues from hospital operations, and contributed to a reduction in the percentage of cost to Revenues from hospital operations to 58.5% in 4Q17 compared with 59.6% in 4Q16. Administrative expenses (including Depreciation and amortization) were Baht 830 million in 4Q17, or 3.9% more year-over-year from Baht 799 million in 4Q16, with a decrease to 18.1% in 4Q17 from 18.5% in 4Q16 as a percentage to Revenues from hospital operations. EBITDA increased by 11.3% year-over-year to Baht 1,422 million in 4Q17 from Baht 1,278 million in 4Q16, with an EBITDA margin of 30.7% in 4Q17 compared to 29.3% in 4Q16.

Ongoing capital spending contributed to higher 4Q17 Depreciation and amortization of Baht 312 million from Baht 291 million in 4Q16.

Corporate income tax of Baht 181 million in 4Q17 was higher than Baht 140 million in 4Q16. The variance is mostly due to the increase in taxable operating profit.

Basic EPS for 4Q17 of Baht 1.27 was 11.9% more than Baht 1.13 in 4Q16, while 4Q17 Diluted EPS increased at the same rate to Baht 1.06 from Baht 0.95 in 4Q16.

2017 Operational Performance

The Company reported Revenues from hospital operations of Baht 18,279 million, a 2.4% improvement year-over-year from Baht 17,851 million in 2016. This was mostly due to the increase in revenues from both Thai and non-Thai patients by 2.3% and 3.1%, respectively. As a result, the revenue contribution from Thai patients in 2017 was 35.6% and from non-Thai patients was 64.4%, compared with 35.8% and 64.2%, respectively, for 2016.

The Company reported Cost of hospital operations (including Depreciation and amortization) of Baht 10,460 million for 2017, or 0.5% more year-over-year from Baht 10,410 million in 2016. This represents a favorable change when compared to the 2.4% growth in Revenues from hospital operations, and contributed to a reduction in the percentage of cost to Revenues from hospital operations to 57.2% in 2017 compared with 58.3% in 2016. Administrative expenses (including Depreciation and amortization) were Baht 3,129 million in 2017, or 0.1% more than Baht 3,125 million in 2016, with a decrease to 17.1% in 2017 from 17.5% in 2016 as a percentage to Revenues from hospital operations. EBITDA increased by 7.4% year-over-year to Baht 6,031 million in 2017 from Baht 5,616 million in 2016, with an EBITDA margin of 32.7% in 2017 compared to 31.2% in 2016.

Ongoing capital spending contributed to higher 2017 Depreciation and amortization of Baht 1,206 million from Baht 1,139 million in 2016.

Corporate income tax of Baht 841 million in 2017 was higher than Baht 774 million in 2016. The variance is mostly due to the increase in taxable operating profit, offset by increased tax benefits related to training expense and CAPEX spending.

Basic EPS for 2017 of Baht 5.41 was 8.8% more than Baht 4.98 in 2016, while 2017 Diluted EPS increased at the same rate to Baht 4.55 from Baht 4.18 in 2016.

EPS - Fully Diluted

1.27 1.06

1.13 0.95

11.9% 11.9%

5.41 4.55

• 4.98 8.8%

• 4.18 8.8%

1Q15

1Q14

Change

As at 31 December 2017, the Company reported Total current assets of Baht 10,550 million, an increase from Baht 8,803 million as at 31 December 2016. The variance is mostly due to a net increase of Baht 1,591 million in Cash, Cash equivalents, and Short-term investments, due to Baht 5,243 million increase in cash from operations, offset with Baht 1,859 million dividend payment, Baht 1,667 million capital spending in 2017 and Baht 170 million interest paid for long-term debentures. Trade receivables were increased by Baht 105 million, or 6.3%, to Baht 1,787 million as at 31 December 2017 from Baht 1,682 million as at 31 December 2016. The collection period improved to 38.7 days as at 31 December 2017 from 43.8 days as at 31 December 2016, due largely to timing differences associated with collections on certain Middle East accounts.

Total non-current assets increased to Baht 12,934 million as at 31 December 2017 from Baht 12,530 million as at 31 December 2016, mostly due to an increase in Property, plant and equipment and Intangible assets, mostly associated with to IT software.

Total current liabilities were Baht 3,647 million as at 31 December 2017, an increase from Baht 2,358 million as at 31 December 2016. The variance was mostly due to Baht 999 million Current portion of long-term debentures due December 2018 and Baht 188 million Short-term loan from and interest payable to a related party associated with the BIL liquidation.

Non-current liabilities were Baht 3,132 million as at 31 December 2017, a decrease from Baht 4,187 million as at 31 December 2016. The change was primarily from Baht 999 million Current portion of long-term debentures reclassified as Current liabilities.

The Company's Interest coverage ratio improved to 34.2x in 2017 from 23.4x in 2016, due to higher EBITDA in 2017 compared to 2016 and less interest expense associated with the Baht 1,500 million repayment of the Series 1 debentures in December 2016. Interest expense decreased by Baht 27 million and Baht 25 million in 2017 and 2016, respectively, for capitalized interest associated with the campus expansion project.

Total shareholders' equity grew to Baht 16,705 million as at 31 December 2017 from Baht 14,788 million as at 31 December 2016. This increase resulted mostly from the Company's 2017 Net profit of Baht 3,944 million, offset with Baht 1,861 million dividend payment. Average return on assets (ROA) increased to 17.6% in 2017 from 17.0% in 2016. Average return on equity (ROE) was 25.0% in 2017, compared to 26.0% in 2016.

* After adding back the 2017 and 2016 capitalized interest expenses related to the campus expansion.

The Company's Net cash flows from operating activities in 2017 were Baht 5,243 million, compared to Baht 5,174 million in 2016. This increase was mainly due to Baht 354 million additional cash from operations, offset with Baht 284 million less in working capital, mostly related to Baht 664 million more in Trade and other receivables offset with Baht 188 million more in accrued expenses and Baht 145 million more in accrued physicians' fees. Net cash flows used in investment activities were Baht 5,868 million in 2017, compared to Baht 1,556 million in 2016. This variance was mainly due to Baht 5,057 million change between Short-term investments and Cash and cash equivalents. The Company reported Net cash flows used in financing activities of Baht 2,061 million in 2017, compared to Baht 3,496 million in 2016, mostly as a result of the Baht 1,500 million repayment of the Series1 debenture in December 2016. As a result of the above, Cash and cash equivalents was Baht 2,470 million as at 31 December 2017, compared to Baht 5,154 million as at 31 December 2016.

The Company's Liquidity ratio as at 31 December 2017 dropped to 2.9x from 3.7x as at 31 December 2016, due to Baht 999 million Current portion of long-term debentures that have been reclassified as Current liabilities since they will be paid in December 2018. The Quick ratio as at 31 December 2017 decreased to 1.2x from 2.9x as at 31 December 2016, mostly as a result of Baht 4,275 million increase in Short-term investments.

(Dr. Chanvit Tanphiphat, MD)

Chairman