Beyond Borders Care

Last weekend, I met a friend who had just undergone bone treatment in Singapore.

"Why not in Indonesia?" I asked.

His answer was simple, 

"The treatment is better in Singapore, and it's covered by insurance"

My friend's story isn't unique. Well, many in my family also choose to seek medical care abroad rather than in Indonesia.

Every year, around one million Indonesians seek medical treatment abroad, mainly in Malaysia, Singapore, and Thailand. 

They spend approximately USD 11.5 bn annually, primarily for heart disease, cancer, and neurological disorders. Many also undergo complex surgical procedures in orthopedics, gastroenterology, and urology.

To address this trend, the Indonesian government is working to improve the domestic healthcare system by enhancing referral services, expanding hospital infrastructure, and focusing on critical diseases such as stroke, heart disease, and diabetes.

In line with these efforts, SILO is investing in expanding its Centers of Excellence (CoE), making it one of the leading hospitals in Indonesia for advanced surgical procedures.

Source: Sucor Research

Since focusing on CONGO last year, SILO has seen impressive results, with around 30% of its revenue in FY23 coming from these operations. This growth has continued in 1Q24, aligning with SILO's global target of achieving 50% revenue contribution from CONGO.

In 1Q24, SILO's revenue reached IDR 3.02 tn, up 14% yoy, meeting both our expectations and consensus estimates.

This growth was primarily driven by a 16% yoy increase in inpatient admissions and a 14% rise in outpatient visits, leading to revenue boosts of 13% for inpatient care and 16% for outpatient services.

Source: Sucor Research

However, SILO's profit in 1Q24 significantly dropped to IDR 14 bn due to a non-cash write-off of IDR 281 bn for impairment loss reserves. This one-time adjustment is linked to the write-off of hospital expansion projects planned before 2019 that remain incomplete.

Excluding this write-off, core net profit reached IDR 303 bn, up 21% yoy. Margins remained relatively stable with a gross margin of 38% and a core net profit margin of 10%.

Source: Sucor Research

SILO boasts one of the strongest balance sheets among hospital providers. The company has maintained a net cash position since 2013 and kept its debt-to-equity ratio very low, not exceeding 0.1x.

Looking ahead to the 2024-2029 period, our analyst expect sustained strong growth, with projected revenue and profit CAGR of 9%.

Source: Sucor Research

This growth is expected to be driven by hospital bed expansion, price adjustments, and increased revenue per inpatient day and outpatient visit through higher CONGO contributions.

Source: Sucor Research

We also foresee stable profitability margins during this period.

Therefore, we maintain our BUY recommendation for SILO with a target price of IDR 2,930.