Prodia Widyahusada (PRDA IJ): Into a healthier life
Independent clinical lab pioneer. PRDA started back in 1973 as a simple laboratory and growing into a leading independent clinical lab with 290 outlets catering 33 provinces in Indonesia. PRDA services include routine, esoteric, non-laboratory testing, referral lab, general medical check-up services, doctor consultation and preventive treatment. As of 9M18, it has successfully conducted 10.6mn tests which mainly dominated by routine test, followed by non-lab and esoteric test (90.5%/6.1%/3.4%) and on the revenue side, the contributions are (75%/10%/15%).
Shifting into specific and preventive tests. With BPJS is expected to be fully implemented in FY20 and its presence is starting to impact PRDA on routine test services. PRDA management plans to drift away from the competition by boosting specific and preventive tests with higher revenue contribution and gross margin. This initiative is reflected in increasing revenue per visit (+9.8% YoY) regardless of decreasing number of visits (-2.4% YoY). Whilst the company keeps introducing new tests going forward (22 new tests in FY18), the challenge remains in promoting the tests to public. To keep the promotion intact, PRDA has allocated special salesforce to generate awareness of the new tests indirectly to patients by promoting it through doctors and hospitals.
Revenue within historical growth with moderate expansion in 2019. PRDA targets revenue growth of 8%-10% in FY19, slightly below the historical 5-year CAGR of 10.1%. Going into 2019, PRDA plans to add 5-7 outlets with estimated capex of IDR4-8bn/outlet with majority of capex is used for rental purpose. Upgrading a clinical lab to a 24 hours regional referral lab in Semarang is also in pipeline at a cost of higher operating expense due to the longer opening hours.
Operational efficiency remains key to sustainable earnings. EBITDA margin is targeted to increase by 50bps in FY19. With the limited revenue growth in FY19, operational efficiency is set to be the deciding factor. Due to the labor-intensive nature, automation to generate tests in labs is currently implemented such that growth in overhead cost is slower than its revenue. Digital innovation such as e-Prodia and Chatbot are introduced to reduce the number of employees required to fulfill administration duties during expansion.
Valuations. PRDA share price is currently trading at 16.2x 18F P/E and 1.7x 18F P/B on consensus estimates. Its share price has plummeted significantly from IPO price of IDR6,500/share in Nov-16 to current price of IDR2,590/share regardless of the stable earnings growth during this period. We believe that earnings growth will be sustainable going forward and by comparison to its indirect competition in healthcare industry, PRDA current price is considerably more attractive.
