Bumrungrad Hospital Public Company Limited (BH) Earnings Call Transcript & Summary

So the first topic is on COVID-related questions. How many COVID PCR tests are done each day in the first quarter of 2022.

We have done about 267 tests in this quarter.

And what was the occupancy rate of beds for COVID-related cases in 2022, Q1?

We saw in the first quarter this year, the occupancy rate is slightly low. It's about 36% of the open days.

What is the average COVID revenue per case during the quarter?

It's about THB 218.

What is the revenue contribution of COVID-related services in the quarter to total revenue?

In terms of the overall optical retreatment, scanning and vaccine is about 5.6%.

And what is management's view about non-COVID time bound patients' revenue in the short term and the long term?

Before we address that question, let me make a comment in general for those of you that have a curiosity about our COVID business in general. If you look back over the last 24 months, initially COVID -- well, COVID has never been a major part of our revenue or our inpatient admissions, principally because many COVID patients had sought other access hospitals and/or were in different step-down services. So as time went on over the last, say, 12 months, it's become even less and less of a piece of our business. What has more been part of our COVID business has been vaccinations as well as testing. You'll see the testing. I think even today, our PCR testing is about THB 1 million something like that per day, which is not a lot. But nonetheless, the point to make is that it's never been a really a big part of our business. So as the investor community -- speaking to you as the investor community, this is not a piece of our business that's a major focus point from your perspective in terms of our utilization, really going back to day 1 of COVID apart from the early days when there was a lot of intensive care patients in our hospital. And when I say a lot, it might be -- might have been 5 or 10 patients at the very, very most. So it's not -- it's never been material and it's even less so now. I'm sorry, Daniel, what was the question?

The question is what is our view going forward for non-COVID tie-in foreign patient business in the short term and the long term?

Well, being who we are, which is an international medical tourism service provider in Asia. If you look at our performance from Q3 and Q4 of 2021 as well as our performance in Q1, you probably have noted by now that our revenue growth for the international business has continued to grow by an order of magnitude of 5% to 10% per quarter, and we'll talk about what those percentages are a little later in the Q&A. But in general, we see rather strong demand as the country opens up and there's a relaxation of the entry requirements, Thailand Pass, quarantine, PCR testing. If we can read the tea leaves with the rest of you as we read the press -- governmental press releases, COVID is becoming a thing of the past in Thailand. The infection rate is down to less than 10,000 per day. The kind of variant that's out there today is much less severe. Death rate is way down across the world as well as it is in Thailand. So given that and Thailand being such an appealing place for people to come and stay and visit, we are seeing, in terms of pent-up demand, unprecedented demand to want to come to Thailand and want to come to Bumrungrad. So we expect -- from a positive standpoint, we expect continued thresholding positive revenue growth throughout 2022. And I would only qualify that by saying that if there were some unknown COVID variant and no one knows anything about that somehow is much more lethal than is out there today, we expect our business to continue to return to good positive growth. To give you an idea, in Q4, as I mentioned in my analyst presentation, we grew our revenue 33%, if you may recall. While we climbed over that number in Q1 and also added an additional 5.7% in top line revenue growth. But more importantly, on the top line revenue growth, the international business turned out to be a much higher number than it was in Q4. And in particular, the Middle Eastern business was a much higher number than Q4, and it was pretty good in and of itself. So we are cautiously positive and cautiously optimistic about future quarters going forward in 2022.

What about the Thai business, Neil? What are your thoughts on that?

Dan, you can pick this from up.

On the Thai business, as we talked about in the previous quarters, since the revenue intensity per case of international business is so much higher, just seeing an increase in international business, you will see then that the overall contribution of Thai business will start to decline just based on that main observation. But that doesn't say that -- it doesn't mean to say that we aren't also interested in Thai business [ reset ] all business. But because the Thai business will grow probably at a slower rate than international business given the lower revenue intensity, lower base of international business, you're going to see that pick up mainly from that side. There is an observation that perhaps with our discounting programs being tapered or being discontinued, that there may be an effect on Thai business. And we don't doubt that there could be an effect to that as sort of purification of revenue that we target really. Because if you remember, when we had COVID, we actually implemented programs to help drive volume to the hospital, not just targeting our own patients, but helping to drive traffic to support the company during a time where we didn't have much international business. As this goes forward, we will expect to see more targeted growth in our core segments and also in our target market. And on that, we fully expect to grow our market share there or maintain our market share as was compared with before COVID period.

Two other comments on the Thai business that I would add to Daniel's comments. And one is that please recall that we are a premium target market institution such that when Thai people are sick and have complicated diseases, for any patient in the world, not just Thai people in Thailand, there's a certain level of pricing elasticity that people look at when they're sick. They want to go to the best place with the best doctors for the best care. And we are arguably the best in all of Southeast Asia, if not -- and as I've said this before to you, I've run health care businesses throughout the world. This is one of the best places you could come for health care. So as Thai people become ill and unfortunately, we all do somewhere in our life span, they will choose the best hospital and will come here just notwithstanding what the pricing sensitivity may or may not be or the discounting policy may or may not be. Having said that, if you look at Q1, our Thai business was down 6.7% against Q4. And as I explained in the analyst presentation, for those of you that weren't able to listen to it as of yet, and I recommend that you do because there's a lot of interesting information there for the benefit of the investor community. During Q4 was at the back end of a 12-month period of high promotions, which expired on 12/31. So there was a lot of catch-up buy-in and redeeming of these vouchers and coupons and such. So when you compare Q4 to Q1, you're not going to be able to match off 12 months of pent-up discounted vouchers versus 1 quarter of standard business. Plus Q1 at 3 fewer days, think about the word being 3 fewer days in the month affecting the quarter. With the combination of those 2 things, when you normalize that out, the Thai business was a push from quarter-to-quarter.

I would like to add more about Thai business. I think that's the very good reason that Khun Ling mentioned. It will be compared between Q4 last year and Q1 this year. However, our strategy, we would like to add back into the premium market and also high intensity. When we look at our department revenue without that our Thai market, having a very good growth, especially in the oncology and cardiology. This means it affects our key strategy to focus into the high-intensity products.

And it's not -- and because of Khun Ling's point here, let me underscore something else. If you look at my first slide in the analyst presentation, I had 4 wavy lines that described and move for us, quite fortunately, from the Southwest to the Northeast in terms of the positive growth for the EBITDA, NOPAT and EBITDA, NOPAT margin lines. We are almost at the margins pre-COVID in 2019, and we're not doing that only with international business. The Thai business is contributing to that margin catch-up pre-COVID. You wouldn't be able to do that solely on international business. Yes, the international business is a major contributor to that revenue intensity growth because patients who come internationally are really quite sick at multiple [indiscernible] and diseases. But Khun Ling's point is a very good one. It goes back to my point. Thai patients are coming here when they're ill. And they will come here and seek a premium target market institution for their care. So the combination of these 2 things are what's taking us closer -- ever closer to pre-COVID margins on EBITDA, NOPAT.

And last but not least is the third-party payer segment. In the Thai business, we have a very good increase in revenue, especially in the insurance and also that [indiscernible] corporate company. That's our key strategy for Thai business.

People recognize now throughout Asia, if not throughout the world, that reputation is key and brand equity and brand vitality is incredibly important to the consumer when they start making health care decisions. This is everywhere in the world, not just Thailand. And thanks to Khun Ling and her staff and everyone here, the 4,000 people and our Board. It isn't by error or happen stance that we've been voted for the second year in a row, the #1 hospital in Thailand by Newsweek Magazine, the Smart Hospital of the Year and one of the top 146 hospitals in the world. That goes a long way with people in their mind and their perception of where to go to seek health care. I haven't any doubt that when people see that -- and we have promoted it because we're proud of it. I haven't any doubt that when people see that they make decisions about seeking and choosing health care amongst other reasons for that reason alone. And this talks about our institution. It talks about our patient experience. It talks about our doctors, and it talks about our 42 years working hard to deliver high-quality health care here. So that's a big part of it, too. I'm absolutely convinced of it.

Moreover, we haven't talked about how we're also expanding our Bumrungrad health network. We've added many more hospitals to the health network. We have expanded our partnership center of excellence, and we will continue to do that. We've also expanded our presence up country around Thailand, which we expect to refer then high revenue intensity core target patients to the hospital. So all these things we continue to do, and we expect that to bear fruit in the future, too. On to AHQ, ASQ and hospital, what is the total revenue from AHQ, ASQ test and go in the first quarter of 2022 compared to total revenue? I'll quickly answer that, approximately 14%. Mind you, you would -- one would probably not take too much notice going forward about the revenue contribution of these programs as the government has fairly stated that they intend to fully normalize international travel in the near term. Test and go will potentially be abandoned, and that's a position that the government continues to maintain. Therefore, this is good news for us because free travel is the benefit of not only our hospitality peers, but also the medical tourism sector too. On to partnership centers of excellence, which we just talked about. Could you please update about the center of excellence operations in 2021 and in the first quarter of 2022? And what is the target growth in 2022 for the year?

In first quarter this year, the net profit from the center of excellence about THB 0.4 million and THB 2.2 million actually increased from net loss from THB 1.8 million in first quarter last year. For the whole year 2021, net loss from center of excellence was THB 1.6 million or THB 4.9 million increase from net loss from THB 6.5 million in 2020. And for the target, net profit in year 2022 is about THB 50 million.

What is the revenue contribution from these partnership centers of excellence to total revenue in 2021 and also first quarter 2022?

Regarding to the joint operation model, BHPCL recorded [indiscernible] and medical equipment lease from center of excellence. Revenue from center of excellence was about 0.03% to total net revenue. And in first quarter this year compared to 0.04% in first quarter 2021 and for the full year 2021. The percentage contribution is very low because the revenue of the hospital in this quarter is very high. It came from other revenue cat. It's not for the center of excellence. So that's why the percent contribution of center of excellence is very low. If you take a look on the total revenue sharing from the center is about THB 1.3 million is the same as level in fourth quarter last year.

How many partnership centers of excellence do you currently have? And how many do you plan to establish by the end of this year?

Currently, we have in total 5 centers in the hospital [indiscernible] center in Nakornthon [indiscernible] and also cancer center that we already announced in Pitsanuvej Hospital. And this year, we plan to open another 4 center of excellence in VitalLife in our plan this year also.

The plan to open was delayed, of course, from COVID. We had expected to open additional centers of excellence earlier on, particularly last year, but that has been pushed back. And now we believe we're going on track with the opening of the country and opening more partnership centers of excellence. On to the financials in general. Can you please elaborate when you say we've had cost savings of THB 58 million in the first quarter of 2022. What are these savings based on? And which number are you using for that?

We have continued implementing many cost measurements again. And in this quarter, we can save -- mostly can find [indiscernible] inventory as a permanent plus the contact, we have mandate, we have negotiated on the product size and [indiscernible] and also do the new beginning with multiple vendors...

In first quarter 2022, the gross margin remained flat on a Q-on-Q basis at 41.9% despite substantial Q-on-Q revenue growth. Hence, is there an implied increase in cost of medical treatments? Or was there other major factors behind the cost increase, for example, rising transportation costs, medical supply cost, et cetera?

When you compare Q-on-Q gross margin in first quarter 2020 was 45.5% and remained the same as fourth quarter last year. The overall cost of hospital version is mostly of them are variable cost increased in the same rate as revenue increased at 5.7%. Inside of the hospital operation cost that had a combination of core reduction cost containment, again, that we have implemented and also have a few medicines and medical [indiscernible] that it caused increase due to a few vendors could not hold their costs seeing the core inflation drive from the oil price increase.

Why did EBITDA margin in first quarter 2022 fall from first -- fourth quarter 2021 despite the lower discount rate and much higher contribution from high revenue intensity foreign patients.

In terms of EBITDA margin in first quarter this year is about 28.2%, slightly lower than fourth quarter last year at 28.4%, so very small cut. So the cost is because of the -- in first quarter 2022, we have less in terms of the number of days and slightly low in terms of the checkup revenue. But in terms of the overall cost, it's pretty close to what I already said in the previous question. So the margin is slightly less, a little bit...

There was also another factor that we had a higher contribution of revenue from vaccination. So we've done a number of alternative vaccinations during the quarter. These generally are lower margin than some of our higher revenue intensity services. This was not only simply because we wanted to support Thailand's recovery to board COVID with helping to administer Moderna vaccines for which we sell to the public in general and administer here on campus. But if revenue contribution was higher than in the previous quarter and that generally had lower margins. So there was some dilutive impact. If we took that out, the margins on EBITDA would have been higher than in the fourth quarter of 2021. On to the next question, how does the impact from Ramadan on revenues in April 2022? How is that -- how is the impact on Ramadan for last month, any different from past Ramadan effects during the COVID and post COVID period, where there -- was there a percentage decline in Middle Eastern revenue in the previous quarter before Ramadan occurred?

As is our practice and policy, we don't comment on go-forward performance where we're in the midst of a quarter. Ramadan, obviously, as part of the second quarter and that quarter has not ended. So we don't really comment on that. But what I can say is that this year for Ramadan what we've seen is a lesser impact of the normal effect of less Middle Eastern patients traveling to Thailand as the country has opened up. So that's been a positive sign for us. And we understand from our sponsors and guarantors that like everyone in the world, people are tired of being locked up in their country unable to travel and our big people are no different. So we saw a bit of that pent-up demand even during Ramadan, which just ended the end of April, and now we're in the celebratory 10-day period called Eid. And typically, Eid is a time of celebration post Ramadan, which lasts for 10 days. And then thereafter, Middle Eastern people will start to fully travel wherever they may choose. Early indications -- as I said before, early indications are there's a lot of pent-up demand to come to Thailand and to come to Bumrungrad. So we're optimistic about that going forward -- in Q3 going forward.

Has the impact of the lower discount rate been fully factored in for the first quarter of 2022 results? Or will there be some further impact in the subsequent quarter?

I would say that the effect of our discounting program was a 12-month long program, if not longer, maybe 14 months going back to 2020 -- end of 2020. So that period of compression is being rolled out over the 12-month period being 2022. So if you look at a trend line on Q1, you would see that from Q4 to Q1, the discount rate went down by about 4 points, as I recall, 17 to 13. I think I'm pretty accurate on that number. My sense is that just trending, taking the, if you will, the time value of money in reverse, I would expect that our discounting percentage will decline further. Our lowest number pre-COVID was 9.8%, but you have to factor in charges, et cetera, into that number, price increases and cost increases, et cetera. But in summary, I would expect that 13% in Q1 to decline as the quarters ensue so throughout 2022.

The discount rate was lower by 3.9% versus a price hike of 3.2%. And we say that the difference of 0.7% was due to higher revenue intensity.

Actually, in Q2, discount over by 3.9% close to 4% as Khun Ling already mentioned. In term of the price increased about 0.9% and intensity increased by 2.4%, while volumes were down by 2.4% due to the less number of days in first quarter 2022. And the our net pet revenue after discount increased by 5.7%.

I agree with Khun Oraphan. I think the short answer to that question is yes. Especially when you look at the increase in the international business quarter-over-quarter and then you look deeper into the Middle Eastern business, which grew in the quarter. And historically, since 1997, since we've been servicing this population is a very highly intensive type of business. So I agree with you, Oraphan. The answer clearly is yes and will continue going forward.

Do you see lower to high patient volume from lower discounts?

I wouldn't think so. And it goes back to my earlier answer that both Khun Ling and I touched on earlier to the question. I wouldn't think so because of the reasons we mentioned, I won't repeat them again. But it's a segmentation -- it's a patient segmentation selection issue about coming to Bumrungrad as opposed to going to lower-tier hospitals, who we obviously consider our competitors, but clearly, they're lower tier from a variety of different standpoints. So I would say the answer to that is no.

How many percent of Chinese patient revenues were of total fly-in patient revenue? So international, we categorize that as international business. And is there any plan to focus more on this market. Maybe I can answer that one. So Chinese international revenue comprised of approximately 2.1% of total revenue. It's slightly higher than the previous quarter. But if you compare that year-on-year, it's down for obvious reasons. China is in currently a deep lockdown, travel from China to other countries is severely restricted and also quite prohibitive both on a quarantine factor, but also on a cost factor. And that meant that the Chinese patient revenue business side of things was not as high as in the previous year. However, if China moves away from the all the dealer policy or a strict lockdown, we do expect Chinese business to come back as Thailand is one of the key destinations for Chinese tourism. It's something that will be a catalyst in the future. We know that after 2 years, things will change. All these things will start to normalize, and we do expect a return to business even from China itself. What is the revenue contribution of Middle Eastern patients to total revenue in 2021 and first quarter 2022 versus first quarter 2021? So it's approximately -- for 2021, it was 12.5%. In the first quarter of 2022, it was 15.1%. So that highlighted what Neil mentioned earlier about the growth of international business during the quarter. On a quarter-on-quarter basis, it was very strong indeed. If you compare that with year-on-year, it was around 11.8% in the previous year's quarter.

And if you're trying to correlate 3 percentage point differences quarter-over-quarter, it's not a linear relationship. It's important to talk about this. So went over again with respect to Bumrungrad. And the reason is that the resource consumption, which is what we define as revenue intensity, resource consumption for these patients is quite high on a per patient day basis, which means revenues are higher on a per patient day basis and/or on an encounter basis. So the correlation in many of these patients relative to volume growth is geometric relative to revenue growth. And that's a very important aspect to who we have been as an institution and how it affects our bottom line, and we see that continuing to improve as it has improved over the last 3 quarters on a margin basis.

What is the contribution of Indo-China patients with total revenue in 2021 and first quarter 2022 versus first quarter in 2021? Well, actually, it was a similar picture. And indeed, Q-on-Q, there was significant growth. So in the -- for the full year 2021, it amounted to about 7.8% of total revenue. In the first quarter of 2022, it was 14.8%. So a significant quarter-on-quarter increase when you compare that with fourth quarter 2021 numbers of 11.4%. Compare that with the first quarter 2021, Indo-China revenue was only around 6.1%. So there was significant growth in the Indo-China market, particularly from Myanmar, from Cambodia and Bangladesh. What is the revenue contribution of the top 10 international patients nationalities as a percentage of total revenues in first quarter 2022? So the top 10, first is Myanmar, amounting to about 6.3% of total revenues for Q1 2022, followed by Kuwait at 5.7%, Bangladesh at 4.5%, Qatar at 4%, Cambodia 3.2%. Mongolia is mainly from our hospital business in Mongolia itself. So UB Songdo Hospital had a very good quarter as well and amounted to -- and contributed approximately 2.8% to total consolidated revenue. UAE was at 2.7%, Oman 1.7%. Oman has actually seen a recovery. If you've looked at us in the past, approximately 3 years ago, you would have seen that the Oman business decreased significantly due to changes to where the Omani patients went to visit and is also India for treatment. Now that the oil business has started to come back. The gas prices are starting to get higher. There's a bit more revenue floating around, and there's some of that spending being reflected at Bumrungrad as well. United States and China followed them behind after Oman at 1.6% and 0.8%, respectively.

And if you look at apart from percentages, which is part of the story, you may ask the next question, which is what is the revenue magnitude of these top countries. And I reviewed them with you in the analyst presentation, if you're curious to know exactly the numbers. I refer you to the analyst presentation on our Investor Relations site. But the big drivers of revenue in the quarter were Myanmar, Bangladesh, Cambodia and Kuwait. They were the substantial revenue drivers for the quarter, amongst the others that Daniel has mentioned.

What was the revenue contribution of fly-in patients, international patients, excluding expats in the first quarter of 2022? So it was around 39.5% of the total revenue. If you compare that with the full year of last year, it was about 27.3%. So there's a significant jump there. What are the estimated costs for heart, kidney and corneal transplants in Bumrungrad?

I would like to say heart transplants [indiscernible] so far in 3 cases. It depends on the patient conditions, severity and the complexity. So we have around THB 250 million in these 3 cases. For kidney transplant also THB 1.2 million, so this by competitors in the market. And for corneal transplant is about THB 0.5 million.

Moving on to RAKxa or our wellness sanitorium at Bangkrajao Island. Could you please update about RAKxa's operation in the first quarter of 2020? And how do you plan to grow the business in 2022?

In terms of RAKxa, the visit is increased about 42% in this quarter compared to first quarter last year, and revenue is grown by more than 100%. And for the -- overall in first quarter 2022, revenue of, let say, about THB 12.4 million and with the EBITDA about THB 0.8 million and EBITDA margin about 6.7%. We plan to grow the business for RAKxa. We will expand for the programs of integrative medicine that I mentioned about cancer survival ship programs or cancer wellness programs. And more and more, we will focus on within Thai market, we will focus on the leadership. And actually, the strategy for RAKxa, our target market is [ intrusion ]. So we will launch our practice together with the accommodation, I mean, VitalLife package, which have a variety of practices such as weight management, coaching up steadily and both operation treatment. So we believe that we can attract more international market after the country open.

We have touted since we went into this new product business December 2020. I believe that's when we first opened it. Am I right Khun Ling? December 2020, we opened RAKxa.

Around November...

November. So I don't get into typically individual numbers by entities. But to give you an idea of the growth orientation of this business for us and speaking to the percentages that Khun Ling just raised and Khun Oraphan just raised. From Q1 2021, the volume for the quarter was 635 visits, in Q2 was 901. Total revenues were double from THB 6 million to THB 12 million. EBITDA for the first time ever in this new business was positive for the quarter at THB 835,000 versus THB 2.9 million loss in Q1 '21. And net profit was half of the loss that it was in Q1 '21. This, we've always felt, once the country started opening back up, would be a superb business for us, and we're going to open this medical -- the next expansion point is the medical village cancer rehab, medical village extension and expansion to the RAKxa portfolio we have there. And we expect that to grow as well because everybody is talking about wellness, prediction, prevention. It's a business for the future. And we are looking into ways we can expand this business beyond the Bangkrajao site into other sites in Thailand and beyond.

What is the nationality breakdown of the RAKxa members? Is we sell membership programs to patients and clients of ours? Can you please update us on this?

In terms of the nationality that we have right now is mostly high. So the Thai is about 96% and non-Thai is about 4%. As we know that they are complete close. So RAKxa opened during the COVID situation. So we target the market international, but we cannot let them fall in. But in terms -- during this period, we still can get the Thai nation come to the RAKxa. So this is another opportunity that once the country open so we can draw a lot of international coming in while we have the Thai support for national. And I think on time, most of the member are expectations -- expect customers. And I think right now COVID with our people change their lifestyle of travel. So right now, they want to go to something that can be less and also can take care of their health. That's why RAKxa is new target of the traveling pace.

So if you think about it, we had positive EBITDA with 95%, 96% Thai patients only. When we did the budget for the startup, it was 50-50 is what we budgeted, Thai people and expat and international coming in. Because of COVID, we modified our entire business plan approach, targeting Thai people locally, high-end Thai people locally. But now as the country is opening up, we'll be targeting as well those international travelers. And we do expect it to break even at the NOPAT line in sometime in 2022, hopefully, by the end of Q2. Although it made a profit at the EBITDA line in Q1 with only 4% international patients out of a total of 100. So the indicators are very positive here for future growth, double-digit future growth going forward.

And also don't forget that mainly the Thai patients who got RAKxa, I guess they usually spend less longer -- they usually have less longer stays, right, than the international guests that we're expecting because they have to travel from overseas into Thailand. They will spend a little longer as is typically the case for international tourism versus domestic tourism. So that should even add additional uplift on the RAKxa business as well when the international business returns.

And as it relates to wellness, while we're talking about RAKxa being a new wellness entity for us, we haven't talked about VitalLife, our scientific wellness business in a while. I am going to highlight that in our Q2 analyst presentation and talk much more about VitalLife. But I will tell you that it had a very strong performance even during COVID in 2021 and a very strong performance in Q1 2022. That business is -- because of the attention by people being given to wellness, that business has done extremely well. And we'll talk a lot more about that in Q2. Very positive performance by VitalLife. It has scalability and potential to grow beyond the 2 sites that we now have. And we're looking at the scalability potential in other sites in Thailand for that business orientation as well.

Can you please explain about the revenue or the profit share model for RAKxa? How does that work?

This one, we already mentioned about that the revenue that we record is about THB 1.2 billion in this quarter. So this is we record based on what we saw and what patients come to use that. So once the patient used that, we record them as the revenue.

So maybe add a little bit explanation to that. So we currently rent space for the VitalLife clinic and the RAKxa Bangkrajao. That is operated by M.K Real Estate, our partner. The revenue generated by the clinic and some percentage of the room rates that are gathered from the packages that we sold contribute to the revenue contribution of RAKxa for us. We also do share some percentage of our revenue to our real estate partner, M.K. Real Estate as well. So there is a bit of cross sharing between the 2 entities, just to give you that bit of color there.

And in addition, it is a very CapEx-light investment for us. The only CapEx we spent there is the major movable equipment inside of VitalLife. The box, the building was built by M.K. Real Estate Development Company. And as Daniel pointed out, we leased back that space and we do a modest revenue share at the bottom.

The last question on RAKxa is when you think you will breakeven. We just answered that. So we'll move on to the CapEx side of the questions. Can you please talk about the expected CapEx spend level this year? And what will it be used for?

In terms of the overall total CapEx, including the [indiscernible] about THB 2.6 billion in 2022. This is a combination of the normal CapEx that we spend for the whole year as normal is about almost THB 500 million. This is the [indiscernible] dependent, we will plan to use it.

Let me give you a little bit more color on that since you're asking about it. Of that number that Khun Oraphan has talked about, approximately THB 1.6 billion thereabouts is going to be spent on a complete IPD, inpatient renovation of all of our patient floors. We've done one floor already that was completed here about a month ago and opened. We will be doing the entirety of the hospital. And when it's done, it will essentially be a brand-new 580-bed hospital. That's a large piece of the number. We have 2 construction projects underway. We have a parking garage underway, which will be completed in Q4. We also have what's called a Bumrungrad Academy building, which is also under construction. That's not a great deal of money. We're also going to be, in 2022, starting the renovation of our PH Small Building. This is the building that has VitalLife, which we moved to another building on campus so we could completely renovate that building. And finally, the other piece of the number that Khun Oraphan talked about was routine CapEx inside the hospital, which at any given year, we spent somewhere around THB 500 million to THB 600 million on routine CapEx. The replacement of older equipment or the addition of new technology, it may be a little bit more than that in 2022 because we're looking at some rather advanced robotic technologies that we want to add into the institution. So the sum total of all of that, that I just summarized for you is, as Khun Oraphan said, THB 2.6 billion in total for the year, assuming we have no delays. If you have -- if you want further detailed information about that, we're happy to provide it. The big number in our multiyear CapEx campus master plan, of course, was our projected development of a new hospital on Petchburi. That's a familiar name to you for those who follow the company. We shelved that project because we didn't need the beds for a lot of different reasons, technological advancements, lower length of stay. It really wasn't necessary. The -- we own the land free and clear. It's a very, very valuable piece of land. We have projected a time line, I believe, 2023 for the start of that project as a slotted budgeted item. We'll make that decision as to whether or not we want to start that project in 2023 or not. So when you add up all of those pieces, you will have the totality of our CapEx, both long term and short term.

Moving on to general questions. Does manage have any concern about competition from new rivals in the market?

Of course, we do. We're always vigilant in paying attention to what's going on in the market. Who's doing what. How they're doing it. How they're approaching it. We for appear, as I said to you before, get paid to worry, especially we too, but that lady down there as well and him as well. Yes, we're constantly looking at what the competition is planning, doing. But we try not to be reactive to a situation. That's not good to be reactive or overly reactive. We have a very, very rigorous detailed plan of how we want to grow the business based upon who we are, and we follow that plan very carefully. We take no competitor lightly. But we continue to prosecute who we are as an institution, which is a premium market target provider targeting both Thai's expats, but as well, principally our international business and in particular, our Middle Eastern business, which pre-COVID was 25% of our total revenue. And I have every trust that we will get back to that number, given what we're hearing and seeing and feeling from our sponsors and guarantors from the Middle East. We also need to probably -- it would be good for you probably to be aware that it's not only about new rivals in the health care business, but also technology providers as well. We are competing on the digital space, not only for developing new technologies or platforms or software in order to better cater to our patients, but also to compete on resources. So IT talent, for example, cloud talent, cloud engineering talent, all these things, IT security, these are things that are in high demand globally, especially in Thailand because of the lack of supply for high-quality talent in those areas. And so therefore, the competition is also there that we have to also manage in how we develop our hospital going forward and becoming a digital hospital offering personalized at the genomic level health care to our patients.

And I think health care is still -- is a business that have to drive to people. So the Thailand, people, Thailand doctors are our good assets. So I think the challenge right now is how to enter the good doctor, the good staff to work into your hospital. So that's why we tried to promote and continue our branding in the global market. And we are very proud and very honor if -- many times, we got the feedback and the comments and also the encouragement from many people that right now, Bumrungrad is the representative of Thailand, it's not about private hospital. So we try to keep focus on what we do and what we would like to achieve as, [indiscernible] mentioned, the culture of the 42-year hospital, it's not easy to build the very strong foundation, the health care and the medical services that have very high quality and focus on the patient safety.

Will the rising inflation rate provide any negative impact to gross margins? And does the company have the ability to increase prices? Yes. Inflation will have an impact globally. We see that in food prices, energy prices. We see that in medication costs to a certain extent. We've been very fortunate to have managed medical supply costs and pharmaceutical costs very, very well. But there is growing pressure from the bottom up from energy prices, from oil prices in driving these costs. Can we increase prices to manage the inflationary impact of that? We believe we can because the cost of delivering what we are offering here is going up. And if we want to continue to offer the level of service and quality that we offer now, we would need to increase costs in order to maintain the level that people expect when they come here. So yes, we do expect that we can continue to increase prices to maintain -- to minimize the inflationary impact to margins. Having said that, there is other costs that would impact the performance of the hospital, which people may not be aware of, and that is globally the impact of inflation on international patients. Oil prices, as is probably very clear to you all is a highly beneficial driver for the Middle Eastern business, oil and gas. And that will be a boom to us on the demand side. Food prices, however, would have possibly a negative impact, particularly in the Middle East because the Middle East is a major importer of food from Ukraine, for example, but also globally. Nonetheless, these governments in the Middle East have the money to be able to afford the social welfare that they need to spend in order to maintain political stability in their countries. And that could be a benefit to us as well because health care is one of the major cost drivers for these Middle Eastern governments and to provide good quality health care is something that their citizens would expect. The continued caring for their citizens in a way that they are growing accustomed to is something that these governments cannot take their foot off the pedal that likely.

We also have to be very, very careful not to fall into the trap of cutting corners in the way we deliver health care to our premium target market clientele. They expect a level of service that is 6 star, which is what Bumrungrad is. And there is a level of price sensitivity by this target market clientele that is willing to pay for 6-star service and they don't want entities and organizations cutting corners just for the benefit of worrying about inflationary pressures. So we won't fall into the trap of cutting the quality of what we do, cutting the quality of our outcomes. We will not do that. We'd rather recalibrate who we are but stay true to our vision and our mission and work through this inflationary period. And it is projected to be not good in 2022, but it's also projected to be less so in 2023. But that is in contrast to the pent-up demand that we see for the type of target market clientele that wants to come to Bumrungrad in 2022. So I expect from our standpoint that while on the one hand, we will not sacrifice quality -- technological quality, nursing care quality, physician quality, physician recruitment, we will not sacrifice, but we will continue to do how we run our business in the past and appeal to the kind of clientele who want to come here and, frankly, can afford to come to Bumrungrad. Not everyone can, but there's a sufficient population of people that want to come here, and that's our target market.

The other question in a similar fashion to talking about the inflationary impact. There is a question in regards to how Russian and Ukraine will directly impact whether positive or negative to our business. I can answer that. The direct impact is quite minimal. Ukrainian and Russian patients comprise a very, very small portion of our business. They're mainly expats living in Thailand, not really fly-in patients. And obviously, during the COVID period, a number of those expats have rotated out and moved back to their countries of origin. So that forms a rather low base for us and it doesn't impact us directly much. It's more, as we mentioned previously, about the impact on inflation, on food prices, on stability in the Middle East, whether those governments can manage that in a proper way that we don't have a second [indiscernible] or something like that, that would negatively impact Middle Eastern business going forward. Fortunately, on the Indo-China business, Indo-China countries such as Cambodia and Myanmar are typically quite self-sufficient, not only on food. But also in the case of Myanmar, there are a major gas producer as well. So they have a buffer to the situation that they have currently around the world, and that is fortunate for them. So we don't expect too much of an impact on that as well. Other additional questions that have been rolling in, how many doses of Moderna vaccine has Bumrungrad ordered versus sold in total in 2021?

We order about 186,000 dose, and we already sold in 2021, almost half of that.

When -- what is the total value of the Moderna vaccine that BH ordered and sold in 2021?

In terms of the value, we ordered about THB 240 million in terms of the value of that we ordered. And we sold about THB 146 million.

When will the unsold vaccines in 2022 expire?

In terms of the vaccine, we have many lots coming into Bumrungrad. And the big lot that we have, the last lot is expiring in November 2022.

Are there any additional plans to generate synergies with Princ hospital?

I think the strategy for the network hospitals, we still look at how to strengthen our referral business and also center of excellence. So the Princ Hospital will be the same as other liver hospital. As you can see that we opened this newer Horizon Center in [indiscernible] and coming soon, we will have another cancer center in the Northeast and is one of a branch of network hospital.

What is your cost control plan and target in 2022?

In 2022, we -- actually we continue in demand the cost even for same 2020, '21 and now in 22. In this year, we still have some room focus on the inventory in terms of the supply medicine and also the service card that we plan to do more new bidding to find a new vendor to support us. And in terms of the target of the cost saving, it's about THB 173 million back in 2022.

How come the Moderna vaccine is impacting the hospital with lower margins. The price is THB 1,650, but the cost is about THB 1,100. So the margin is high at around 45% to 46%. Also, there should not be much associated expenses relating to these services. Lastly, the COVID revenues, including -- which includes vaccine only 5% of total revenue, so it should not move a needle. I can answer that part. Actually, the margins are lower, significantly lower than that. It's not just about the gross cost of the Moderna vaccine, but the ancillary costs associated with that. It includes the staffing, the space. It includes over time. It includes the marketing that we do as well. All these costs need to be factored in. So overall, the margin is lower, and that has impacted the EBITDA margin for the quarter, if you compare it Q-on-Q because of the higher number of vaccinations in the first quarter compared to the fourth quarter. You compare that with the overall medicine margin. It's also significantly lower than what we usually receive from medications.

Yes. And on the Moderna vaccine program or any vaccine program, any institution doing this around the world is not doing it for profit purposes. We were quite willing as a matter of public service to Thai people and expect people to lose money on the Moderna vaccination program. It was a public service thing that we did as an organization then and now, we're quite willing to provide a service to the Thai people. And that hasn't changed. Trust me, we weren't looking for the Moderna vaccine program to provide any bottom line contribution, not then, not now and not going forward. So for us, it's a de minimis -- actually, it's less than a de minimis issue, really more about public service to Thai people.

Compared with the benefit -- if we factor in the benefit of lower discounts, much higher revenue contribution from international business, which has high revenue intensity and cost savings of THB 58 million during first quarter, shouldn't the margin vastly improved from the fourth quarter of 2021? We just explained that, but it was an impact due partly from the Moderna vaccine as well as some of the cost increases from medications that Khun Oraphan mentioned earlier in the Q&A session.

And I think you'll see the reduction in the percentages. As I mentioned earlier, you will see the trend line going downward on the percentages from 17% to 13%. My projections is somewhere very, very low double digits before the end of the third quarter. I'd like to get single -- high single digits, which is where we were, as I said earlier, in pre-COVID. And it is our -- it is my intent to get to that point because that's our normalized rate. And as we move downward on the discount percentage, it will have a corresponding effect on the bottom line, assuming all other things are equal. If inflation rears itself, we had in many, many different aspects of our cost side of our business, we'll have to manage that. There are some things we don't control, energy prices. Khun Oraphan and I were just talking about that since Q4, I think our electricity has gone up twice since Q4. You don't control that, and we can't turn off lights and generators and such just because electricity prices went up. So there are some things that are in the short term and really in the long term are not controllable. But that's not everything. Food prices will go up, energy prices will go up. We see room for rate increases within reason that are affordable. People expect some level of rate increases. You recall that we didn't have, but we froze our rates for 6 months. And then beyond that, we had very, very, very modest rate increase. And we'll look to balance that business going forward given inflationary pressures. That's the only wildcard in 2022 that every business base is in Thailand, not just Bumrungrad, not just the health care sector. The only advantage the health care sector has is that it is an anticyclical defensive business. What do I mean by that? People get sick no matter what the inflation is, and people seek the best in health care when they're ill. And our hope is that they will choose Bumrungrad when they are ill.

There's also some offset, right, because the Thai baht is quite a bit weaker now than the U.S. dollars. So there is some support there for the international patients flying in if we were to increase prices just to keep that in mind.

And we don't put ourselves in a position of ForEx risk. Patients, in large measure, pay us in Thai baht. There's a few -- very, very few exceptions to that from our Middle East sponsors going long back in time. But for the vast, vast, vast majority of patients, they pay us in Thai baht because we are here in Thailand, trading in Thai baht. So we don't take the ForEx risk, which is important in this kind of a fiscal environment.

The next question is, again, in regards to the lower discount level, the lower COVID contribution, and we expect high revenue to continue to be lower sequentially. We've answered that earlier. We don't expect it, we do expect high business to continue to grow for a number of reasons we stated earlier. How do we guide for 2022 for Thai revenue versus 2021? Maybe you would like to add something.

We don't guide. For those of you that don't know, we make projections for the coming quarter only on top line revenue growth. I have addressed the issue of guidance for each one of the previous quarters as I did for Q2. How do you guide for a 33% revenue growth in Q4 against Q1, which jumped 5.7%, not driven by rate increases, I might add. I can only say that Q2, we are cautiously optimistic that it will continue to trend line growth upward. Q3 should be better yet because it's post-Ramadan, post Eid celebration holiday. We are optimistic about 2022. What that percentage is in revenue growth quarter-over-quarter? No one has a guess about that, except my expectation is it will be positive, and it will be above wage inflation, which is running about 3%, 4%, depending upon which industry you look at. But even wage inflation is rising, principally because of the inflation in general rising. So because we're a defensive anticyclical industry and because the country has opened up, a lot of positive signs at international medical tourists want to come to Thailand, now that the country is opening up and we're pass COVID. And I keep stressing that to my staff here, we need to look past COVID. It is not the intense problem that it was 1.5 years ago. So we're focusing our business and looking at how we service our business pre-COVID going forward.

Last question. How will you guide for international business versus pre-COVID? I'll add a little bit to that. We don't provide guidance. However, if you take a look at what's developing now, test and go going to be removed and much more free international travel is going to come back. That's going to be a big positive catalyst. Question is how do the airlines respond? What are the frequency of flights? What are the costs of air travel due to high fuel prices? That's something that we are not in control of. But given what we've seen in Europe and the United States with people traveling because people want to travel, there's a lot of pent-up demand of people wanting to travel. We believe that there is good positive signs to expect a big return of international travel to Thailand and also some of that to Bumrungrad as well.

I'll answer that by saying, look at the trend line differences between Q4 or Q1, there is your answer.

And with that, that concludes the live Q&A session for the first quarter of 2022 Bumrungrad Hospital Public Company Limited. I thank all the management who are present here to take time out of their valuable day to help answer questions. We will see you in August. We will be releasing our second quarter 2022 financial statements on the 11th of August. So stay tuned then. And if you have any further questions, please let I or our Investor Relations know. Thank you very much. [Foreign Language]