01 November 2017

Siloam International (SILO IJ)

Results Note
HOLD (Unchanged)

Stock Data Weak 9M17 earnings

Target price (Rp) Rp10,800
Weak 9M17 earnings (-26% yoy), below ours and consensus
Prior TP (Rp) Rp11,100
Shareprice (Rp) Rp9,750 Patient volume pick-up in 3Q17
Equity | Indonesia | Healthcare

Upside/downside (%) +10.8 Completed right issue to fund expansions and working capital
Sharesoutstanding (m) 1,445 Maintain HOLD with lower TP of Rp10,800 (from Rp11,100)
Marketcap. (US$ m) 1,039
Free float (%) 2,920.0 Weak 9M17 earnings (-26% yoy), below ours and consensus estimates.
Avg. 6m dailyT/O (US$ m) 0.2 Siloam International Hospital (SILO) booked earnings of Rp63bn (-26% yoy)
albeit net margin improvement to 1.5% from 1% in 9M16 from rising interest
Price Performance
income. This forms 65/53% of ours and consensus estimates, but 4Q average in
3M 6M 12M last two years only tend to form 0-5% of full-year result. Therefore, we believe
Absolute (%) 5.5 -28.4 -1.3 9M17 SILO’s earnings were below ours and consensus estimates. Revenue grew
Relative to JCI (%) 1.5 -34.1 -12.8 12% yoy, supported by outpatient (OPD) by 15% yoy and inpatient (IPD) by 11%
yoy in 9M17. Nevertheless, new hospitals opening in 2017 also increases
52w high/low (Rp) 9,750 - 8,945
operational cost which caused lower operating margin by 50bps in 9M17.
150
140 Patient volume pick up in 3Q17. SILO’s patient volume has improved in 3Q17
130 (+18% qoq) after weak 2Q17 performance (-4.5% qoq). The strong growth
120 recovery was seen in both OPD and IPD by 18/16% qoq in 3Q17 (vs. -4/-5% qoq
110
in 2Q17). Interestingly, private patient volume rebounded by 15% qoq growth in
100
3Q17 after declining by 7% qoq in 2Q17, whereas BPJS (National Healthcare
90
80
Security) patient admissions continue to show strong growth of 20% qoq in 3Q17
Oct-17
Oct-17
Mar-17
Mar-17
Jan-17
Jan-17

May-17
May-17
Jun-17
Jul-17
Nov-16
Nov-16
Dec-16

Apr-17

Aug-17
Aug-17
Sep-17
Feb-17

from 3% qoq only in 2Q17. As of 9M17, BPJS has reached 31% from overall
patient volume from 23% only in 9M16.
SILO-Rebase JCI Index-Rebase

Major Shareholders Completed right issue to fund expansions and working capital. SILO has
Lippo Karawaci 70.8% completed its second right issue, raising Rp3.1tn. LPKR (Lippo Karawaci) remains
as majority shareholder with 51% ownership while Prime Health Company Limited
(CVC) increased its ownership to 15.7% from 15% on first right issue. 88% of
fund proceed will be used for business expansions, including to build and/or
Estimate Change; Vs. Consensus
acquire new hospital while remaining will be used as working capital.
2017 2018
Latest EPS (Rp) 66 100 Maintain HOLD with lower TP of Rp 10,800. We cut our earnings by 11/6%
Vs. Prior EPS (%) (11.0) (6.0) for FY17/18F as we factored in higher depreciation from new hospital opening and
Vs. Consensus (%) (27.0) (10.0) raising interest income from recent right issue. However, we leave our operating
forecast relatively unchanged given on-track results. Our new TP of
Source: Bloomberg
Rp10,800/share implies EV/EBITDA of 16.5x FY17F. We like SILO given its
improving execution in their expansion but expect company to enhance its
profitability after more hospitals mature, which would serve as upside potential to
our call.

Year To 31 Dec 2015A 2016A 2017F 2018F 2019F

Revenue (RpBn) 4,144 5,168 6,381 7,797 8,943
EBITDA (RpBn) 548 651 729 867 934
EBITDA Growth (%) 22.5 18.8 12.0 18.9 7.7
Net Profit (RpBn) 70 86 86 125 144
EPS (Rp) 54 66 66 96 111
EPS Growth (%) (2.0) 22.2 0.2 45.3 14.8
Net Gearing (%) (7.3) (23.1) (46.7) (42.1) (51.8)
PER (x) 180.1 147.5 147.2 101.3 88.2
Eveline Liauw PBV (x) 7.3 4.1 3.9 3.8 3.6
PT Indo Premier Sekuritas Dividend Yield (%) 0.0 0.0 0.0 0.0 0.0
eveline.liauw@ipc.co.id EV/EBITDA (x) 20.8 17.6 14.7 12.4 11.2
+62 21 5793 1169 Source : SILO, IndoPremier Share Price Closing as of : 31-October-2017

Refer to Important disclosures in the last page of this report

SILO Results Note

Fig. 2: … but flattish private patient vol growth at 0.6% yoy

Fig. 1: Strong BPJS patient vol growth at 58% yoy in 9M17
in 9M17

(People)
(People)

1,136,000
700,000

600,000 1,134,000

500,000
1,132,000
400,000
1,130,000
300,000

200,000 1,128,000

100,000 1,126,000

-
9M17 9M16 1,124,000
9M17 9M16

Source: Company, IndoPremier Source: Company, IndoPremier

Fig. 3: Recovery in traffic volume after drop in 2Q17 Fig. 4: Revenue historical and forecast

Quarterly patient admissions Growth QoQ

Outpatient Inpatient
('000 people) (Rp bn)

700 30%
10,000
600 25% 9,000

20% 8,000
500
7,000
15%
400 6,000
10% 5,000
300
5% 4,000
200 3,000
0%
2,000
100 -5% 1,000
0 -10% -
2Q14 4Q14 2Q15 4Q15 2Q16 4Q16 2Q17 2013A 2014A 2015A 2016A 2017F 2018F 2019F

Source: Company, IndoPremier Source: Company, IndoPremier

Fig. 5: Gross profit to grow CAGR 17% 2016-19F Fig. 6: Net profit to improve from diminishing impairment

Gross Profit Gross margin Net Profit Net margin

(Rp tn)
2.5 30% (Rp bn)
29.5%
30% 160 2.5%
2.2%
2.0
29% 140
28.5% 1.7% 2.0%
28.4% 120 1.7% 1.6% 1.6%
29%
1.5
100 1.4%
28% 1.5%
1.0 27.3% 27.3% 80
27.2% 28%
60 1.0%
27%
0.5 40
27% 0.5%
20
- 26%
2014A 2015A 2016A 2017F 2018F 2019F
- 0.0%
2014A 2015A 2016A 2017F 2018F 2019F

Source: Company, IndoPremier Source: Company, IndoPremier

Refer to Important disclosures in the last page of this report 2

SILO Results Note

Fig. 7: 3Q17 results summary

Year to Dec 31 (Rp bn) 9M17 9M16 YoY 3Q17 2Q17 QoQ % of ours % of cons.
Revenue 4,292.1 3,824.4 12% 1,534.2 1,346.0 14% 67% 70%
Gross profit 1,219.9 1,121.6 9% 450.2 371.8 21% 70% 68%
Operating profit 218.0 213.3 2% 101.9 30.5 234% 65% 61%
Net profit 62.9 85.5 -26% 36.0 (13.6) -366% 65% 53%

Margin
Gross profit margin 28.4% 29.3% 29.3% 27.6%
Operating profit margin 5.1% 5.6% 6.6% 2.3%
Net profit margin 1.5% 2.2% 2.3% -1.0%
Source: Company, IndoPremier

Fig. 8: Changes in earnings forecast

(Old) (New) Change
Year to Dec 31 (Rp bn) 2017F 2018F 2017F 2018F 2017F 2018F
Revenue 6,381 7,797 6,381 7,797 0% 0%
Gross profit 1,748 2,139 1,745 2,117 0% -1%
Operating profit 334 419 329 412 -2% -2%
EBITDA 729 844 758 896 4% 6%
Net profit 96 134 86 125 -11% -6%

Margin
Gross profit margin 27.4% 27.4% 27.3% 27.2%
Operating profit margin 5.2% 5.4% 5.2% 5.3%
EBITDA margin 11.4% 10.8% 11.9% 11.5%
Net profit margin 1.5% 1.7% 1.4% 1.6%
Source: Company, IndoPremier

Refer to Important disclosures in the last page of this report 3

SILO Results Note

Year To 31 Dec (RpBn) 2015A 2016A 2017F 2018F 2019F

Income Statement

Net Revenue 4,144 5,168 6,381 7,797 8,943

Cost of Sales (2,968) (3,646) (4,636) (5,680) (6,501)
Gross Profit 1,177 1,522 1,745 2,117 2,442
SG&A Expenses (965) (1,231) (1,416) (1,706) (1,992)
Operating Profit 211 292 329 412 451
Net Interest (35) (29) (32) (45) (49)
Forex Gain (Loss) 0 0 0 0 0
Others-Net (70) (90) (123) (121) (122)
Pre-Tax Income 106 172 174 246 279
Income Tax (44) (74) (74) (105) (119)
Minorities 9 (13) (14) (16) (16)
Net Income 70 86 86 125 144

Balance Sheet

Cash & Equivalent 160 740 1,528 1,424 1,832

Receivable 575 776 444 756 548

Inventory 140 178 202 269 307

Other Current Assets 81 212 254 313 372

Total Current Assets 956 1,907 2,428 2,762 3,059

Fixed Assets - Net 1,553 1,694 1,746 1,762 1,719

Goodwill 0 0 0 0 0

Non Current Assets 454 579 591 576 584

Total Assets 2,986 4,216 4,801 5,151 5,420

ST Loans 2 1 1 1 2

Payable 255 314 0 703 728

Other Payables 365 403 598 680 755

Current Portion of LT Loans 7 7 7 2 0

Total Current Liab. 630 726 1,202 1,387 1,484

Long Term Loans 23 10 10 2 0

Other LT Liab. 593 351 360 390 404

Total Liabilities 1,246 1,087 1,572 1,780 1,889

Equity 1,380 2,675 2,675 2,675 2,675

Retained Earnings 364 447 533 659 802

Minority Interest (4) 7 21 37 53

Total SHE + Minority Int. 1,740 3,129 3,230 3,371 3,531

Total Liabilities & Equity 2,986 4,216 4,801 5,151 5,420

Source : SILO,IndoPremier

Refer to Important disclosures in the last page of this report 4

SILO Results Note

Year to 31 Dec 2015A 2016A 2017F 2018F 2019F

Cash Flow

Net Income (Excl.Extraordinary&Min.Int) 62 99 100 141 160

Depr. & Amortization 334 357 401 456 483

Changes in Working Capital (77) (183) 653 (215) 228

Others 64 42 (43) 119 46

Cash Flow From Operating 383 315 1,111 501 917
Capital Expenditure (351) (623) (464) (456) (448)
Others 5 3 15 15 14
Cash Flow From Investing (346) (620) (450) (441) (434)
Loans (14) (14) 0 (12) (5)
Equity 0 1,295 1 0 0
Dividends 6 0 0 0 0
Others (123) (282) (44) (56) (59)
Cash Flow From Financing (131) 999 (43) (68) (63)
Changes in Cash (94) 694 618 (8) 420

Financial Ratios

Gross Margin (%) 28.4 29.5 27.3 27.2 27.3

Operating Margin (%) 5.1 5.6 5.2 5.3 5.0
Pre-Tax Margin (%) 2.6 3.3 2.7 3.2 3.1
Net Margin (%) 1.7 1.7 1.4 1.6 1.6
ROA (%) 2.4 2.4 1.9 2.5 2.7
ROE (%) 4.1 3.5 2.7 3.8 4.2
ROIC (%) 4.3 3.6 3.2 4.3 4.6

Acct. Receivables TO (days) 0.6 0.6 0.3 0.4 0.4

Acct. Receivables - Other TO (days) 42.0 47.2 34.5 27.7 26.3
Inventory TO (days) 24.1 22.9 24.4 24.1 22.6
Payable TO (days) 27.5 28.5 35.8 41.7 40.2
Acct. Payables - Other TO (days) 0.0 0.0 0.0 0.0 0.0

Debt to Equity (%) 1.9 0.6 0.6 0.2 0.0

Interest Coverage Ratio (x) 0.2 0.1 0.1 0.1 0.1
Net Gearing (%) (7.3) (23.1) (46.7) (42.1) (51.8)

Source : SILO,IndoPremier

Refer to Important disclosures in the last page of this report 5

 Head Office
PT INDO PREMIER SEKURITAS
Wisma GKBI 7/F Suite 718
Jl. Jend. Sudirman No.28
Jakarta 10210 - Indonesia
p +62.21.5793.1168
f +62.21.5793.1167

INVESTMENT RATINGS
BUY : Expected total return of 10% or more within a 12-month period
HOLD : Expected total return between -10% and 10% within a 12-month period
SELL : Expected total return of -10% or worse within a 12-month period

ANALYSTS CERTIFICATION.
The views expressed in this research report accurately reflect the analysts personal views about any and all of the subject securities or issuers; and no part of the
research analyst's compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.

DISCLAIMERS
This research is based on information obtained from sources believed to be reliable, but we do not make any representation or warranty nor accept any
responsibility or liability as to its accuracy, completeness or correctness. Opinions expressed are subject to change without notice. This document is prepared for
general circulation. Any recommendations contained in this document does not have regard to the specific investment objectives, financial situation and the
particular needs of any specific addressee. This document is not and should not be construed as an offer or a solicitation of an offer to purchase or subscribe or
sell any securities. PT. Indo Premier Sekuritas or its affiliates may seek or will seek investment banking or other business relationships with the companies in this
report.