April 24, 2015
COMPANY NEWS
Town Health International Medical Group [3886.HK; HK$2.37 Not Rated] Transforming into a medical services provider.
Market Cap: US$1,711m; Free Float: 66.0%; 3-months Average Daily Turnover: US$4.8m
Analyst: Mark Po
The Company. Town Health International Medical Group (Town
Health) was transferred to the main board in 2008. With local
largest medical clinic network, the group conducted a series of
M&A in 2014 and 2015 to transform itself into a leading healthcare
flagship brand, housing everything from specialist centers,
managed care operation, laboratory chains, hospitals, medical
devices to pharmaceutical products, dentists and medical
dermatology. The group also introduced Fubon (Fubon Life
Insurance and Fubon Insurance) and China Life Insurance
(Group), parent of China Life [2628.HK] as shareholders. After
completing the issuance of shares, China Life will become the
largest shareholders with 23% stake and Fubon will hold 8.36%.
Managed-care operations to bring synergy. Town Health has a
long history of established healthcare operations before owning
now the largest clinic chain in Hong Kong. The group acquired Dr.
Vio & Partners (Dr. Vio), is one of the top four managed-care
providers in Hong Kong with over 1m consultations per year. Town
Health will leverage on Dr. Vio's client base to boost turnover
growth of its clinic business as well as acquire small managed-care
operators to support future growth. Town Health is well-positioned
to benefit from medical reform in Hong Kong.
High-margin medical beauty business to enhance profitability.
Town Health has acquired Bonjour Beauty which owns 11 beauty
salons, 3 skin care clinics and 2 massage shops. In 2015, the
company plans to open one plastic surgery center and one medical
dermatology center. Management targets to improve net margin of
this segment from 10.1% to over 20% in 3-5 years through offering
more higher value-added services to customers.
Increasing exposure to China market. Town Health is actively
exploring business opportunities in healthcare market in China.
Town Health announced the acquisition of 49% of Huayao Medical
Group (Huayao). After restructuring, Huayao will indirectly hold
100% of Hangzhou Shengkang Hospital and Hangzhou Shuke
Medical Clinic, with guaranteed profits of Rmb30m, Rmb36m and
Rmb42m in 2015-17 respectively. We expect Town Health to
continue to acquire hospitals in China, one of the medium to long
term growth drivers.
With support from China Life Insurance, management believes
Town Health will explore business opportunities in several areas
including: a) hospital acquisitions & reform, b) managed care
business in China, c) developing medical insurance products and
d) old age homes and rehabilitation healthcare. The group is also
working with China Life Insurance to promote healthcare tourism.
Divesting of non-core businesses. Investment securities and
[Town Health International Medical Group ]
(HK$)
(HK$ million)
4
250
200
3
150
2
100
1
0
Apr14
50
0
Jun14
Key Financials
(in HK$ m)
Aug14
Oct14
Turnover (RHS)
2011
Dec14
Price (LHS)
2012
Feb15
2013
2014
Rev enue
339.3
341.8
354.6
494.6
Gross Prof it
114.1
118.6
120.2
160.6
33.6
34.7
33.9
n.a.
Gross Margin %
Net Prof it
64.2
(435.0)
49.6
84.6
18.9
(127.3)
14.0
17.1
0.01
(0.10)
0.01
0.02
ROE (%)
4.1
(32.5)
Div idend Y ield (%)
-
Net Margin %
EPS (Basic)
PER (x)
169.3
PBR (x)
6.97
(24.7)
9.57
4.2
5.1
0.46
0.14
237.0
128.8
8.99
5.74
Source: Bloomberg, Company Data.
property rental contributed 3.9% of the Town Health’s
revenue and 37.2% of net profit in 2014. Town Health plans
to gradually dispose all non-strategic investment securities
and property rental businesses. Town Health is also
developing a mobile healthcare O2O platform, One-Pass.
The O2O platform will be used for integration of business
units and affiliated companies under Town Health.
Our view. Town Health is now in the process of
transforming itself into a health-care service provider with
increasing exposure to China, where it is the world’s second
largest healthcare market. We share the view that it takes
time for investors to understand its business model before
building up their confidence. We expect Town Health to
release more news flow regarding M&As and co-operation
with China Life Insurance after its completion of share
placement as Town Health will have HK$2.8bn for M&A in
China.
Catalysts: Completing the deal with China Life Insurance
and news flow on acquisitions.
1
Largest player in Hong Kong
Healthcare industry in Hong Kong is on up uptrend. Town Health is a
leading healthcare services provider in Hong Kong. With the largest clinic chain
in Hong Kong including 84 medical clinics, 11 dental clinics and 11 health check
centers, Town Health provides clinic, dental, health check and laboratory
services.
Town Health’s clinic chain business includes:
a) 54 general-practice clinics which provide comprehensive outpatient services,
including consultation, lab testing and vaccination;
b) 30 specialty-practice clinics which provide consultation and treatment for
cardiology, oncology, dermatology, gastroenterology & herpetology and
orthopaedics;
c) 11 dental clinics; and
d) 11 health check centers.
Growth opportunity
Hong Kong is now facing with rapidly ageing population and escalating
healthcare demand. According to market and public information, the Hong Kong
Government is now contemplating on launching the overdue medical reform. It
is believed that the main theme of the medical reform would be to shift patients
from public sector to private healthcare sector by means of direct subsidization
or healthcare insurances. There have been a number of public-private interface
exercises proposed by the Hospital Authority, where public patients are
encouraged to make use of private healthcare services, with subsidization
provided by the Hospital Authority. The Hong Kong Government has also
increased healthcare subsidization from HK$500 to HK$2,000 per head a year
for the elderly to consume healthcare and related services in the private sector.
In 2013, the Hong Kong Government assigned a few land sites for private
investors to build new private hospitals so as to replenish the supply of private
hospital beds. All these point to the direction that the Hong Kong Government
wants to nurture the growth of private healthcare sector, and hopes to make use
of a flourishing private healthcare sector to shoulder a larger part of public
healthcare burden.
The shifting process will create huge market opportunities for the Group to
capture. With the leading position and well established clinic network in the
Hong Kong healthcare industry, the Group is well positioned to seize the
immense growth potential of the market.
Offering more higher value-added services
General-practice clinics have relatively low gross margins of 5-7% due to low
entry barriers, low bargaining power relative to doctors and intense competition
(there are 8,000-9,000 private-sector doctors, implying 8,000-9,000 clinics in
Hong Kong). In contrast, specialty-practice clinics enjoy high gross margins of
20-30% as they rely heavily on references from general-practice clinics and
managed-care operators, and also enjoy relatively high service fees. To boost
revenue and gross margin, Town Health is building eight mega specialty centers
(for specialty practice) covering physiotherapy, general surgery, ENT, in-vitro
fertilisation, ophthalmology, cardiology, plastic surgery and cosmetic
dermatology, and orthopedics. The clinics will be majority owned by Town
Health with minority interests held by doctors. The company plans to build 3-4
centers in 2015 and another 3-4 centers in 2016.
2
Figure 1: Town Health’s chain clinic vs other operators in HK
Town Health
UMP
Human Health
1989
1990
1997
No. of medical clinics
84
14
50
No. of dental clinics
11
7
8
No. of health check centers
11
5
1
Formed
Imaging & diagnostic services
PET, CT, MRI, X-Ray& Ultrasound
PET, MRI, X-Ray & Ultrasound CT, MRI, X-Ray & Ultrasound
Laboratory
Yes
No
No
Pharmaceuticals
Yes
No
No
Source: Company Data, CGIH
Figure 2: Medical Revenue
Figure 3: Breakdown of Town Health’s Medical Revenue
HK$m
HK$m
335
332
330
SP
Dental
350
300
325
320
GP
250
319
200
316
315
150
312
310
100
305
50
0
300
2011
2012
Source: Company Data, Bloomberg, CGIH
2013
2014
2012
2013
2014
Source: Company Data
3
Town Health actively advances its healthcare business in Hong Kong through
acquisitions and developing new platforms. The group made four major
acquisitions in 2014 and 2015.
Town Health acquired 94.3% equity interest in Dr. Vio & Partners (Dr Vio) in
Sep14, both of which are a direct medical service provider and a well-regarded
administrator of third-party funded medical services with substantial in-house
expertise. Total consideration of HK$409.3m is based on 12x FY13PBT.
A new chapter
Town Health completed the acquisition of Bonjour Beauty International Limited
(Bonjour Beauty) in Jan15. Bonjour Beauty is a well-established cosmetic beauty
chain in Hong Kong with a large customer base, which owns 16 beauty and
health salons under the brands of “About Beauty”, “Dr. Protalk” and “Top
Comfort” in Hong Kong, Macau and China. Since the Group is one of the leading
medical services providers in Hong Kong, such acquisition is in line with the
group’s strategy to develop medical cosmetic dermatology business and could
bring synergistic advantages for both parties. Total consideration is HK$427.8m
based on 12x FY13PE satisfied by issuing 365m shares of Town Health at
HK$1.16/share.
The Group subscribed for approximately 9.9% of shares of Luck Key Investment
Limited in Aug14 and further increased its holdings to 35% in Feb15. Luck Key
and its subsidiaries, through nine health check centers and two laboratories in
Hong Kong, provide one-stop medical diagnostic and health check services with
advanced imaging technology. Town Health’s management believes that Luck
Key Group HK could support and facilitate the business development of the
Group in Hong Kong and China healthcare markets.
Town Health announced the acquisition of 49% of Huayao for RMB151.3m on 17
Mar 15. Huayao indirectly owns Hangzhou Shengkang Hospital and Hangzhou
Shuke Medical Clinic. The seller of Huayao has guaranteed audited profits
(excluding non-recurring and exceptional gains) of not less than RMB30m,
RMB36m and RMB42m in 2015-17, implying YoY growth of 20% and 16.7% in
2016 and 2017 respectively.
Through the acquisitions, Town Health is transforming itself into a leading
healthcare flagship brand, housing everything from specialist centers, hospitals,
medical devices to pharmaceutical products, dentists and medical dermatology.
.
4
Dr. Vio is a leading player
Sizable market but fragmented
Dr. Vio is a leading primary and specialty healthcare services provider. Dr.
Vio provides direct medical care services as well as administrative services for
insurance-based or employer-sponsored medical schemes. The end users of
these medical schemes can seek medical and healthcare services provided by
Dr. Vio. It generates more than 90% of revenues from the administrative services
and serves more than 400 corporations. Dr Vio generates income from: a)
commissions of between 15-20% of consultation fees and b) revenue split of
between 20-40% of specialist doctor fees, laboratory checkup or medical
diagnostic tests.
According to management, the addressable size of managed care operation
market is estimated at HK$16-17bn in HK, but it is a fragmented market with the
top four players only account for 1/7 of market share. Dr. Vio has been grabbing
market share from its largest competitor, Quality Healthcare (QH). With its strong
service quality, Dr. Vio has been achieving a relatively high gross margin of 1012% vs 5-6% achieved by its peers, according to Town Health’s management.
Acquisition of Dr. Vio will provide considerable synergetic effects to Town Health.
Cross-referrals between Town Health and Dr. Vio can provide more efficient and
integrated care to patients, and the clinic network of Town Health could be further
expanded. Town Health’s management has confidence in the Dr. Vio’s managedcare operations and plans to grow Dr. Vio through promotions, marketing
campaigns, setting up of new branches and M&As. To encourage in-network
doctors of Town Health to use Dr. Vio's services, Town Health plans to increase
commission rates for in-network doctors providing specialty-practice services
from 60% to 75%. Doctors are allowed to bill through various HMOs including Dr.
Vio, JFA and Quality Healthcare. Many transactions are leaded to outside
panels, Town Health’s increase in commission rate is concentrating all
transactions of the doctors to Dr. Vio. This is only related to specialists of Town
Health. In addition, Town Health will increase marketing activities to secure more
contracts.
Substantial referral for specialty medical care from Dr. Vio to the Group greatly
supports the establishment of specialty centers (Ophthalmology, Orthopaedics,
Cosmetic Dermatology, General Surgery & In Vitro Fertilization, etc.). Each of
these specialty centers offers spacious environment with a number of specialist
doctors of the same specialty equipped with day surgery setup and sophisticated
equipment comparable to private hospitals.
The company also plans to add one clinic under Dr. Vio, which is expected to be
completed and start generating profits in 2016. Furthermore, Town Health plans
to acquire small managed-care operators in Hong Kong to consolidate this
fragmented market and support future growth.
Figure 4: Synergies between Town Health & Dr. Vio
Perfect match between Town Health & Dr.
Vio
Source: Company Data, CGIH
5
Figure 5: Dr. Vio historical performance
HK$m
Turnover
%
EBT Margin
350
13.5
300
13.0
250
12.5
200
12.0
150
11.5
100
11.0
50
10.5
Steady growth
0
10.0
2012
2013
2014
Source: Company Data, CGIH
6
Town Health acquired and consolidated Bonjour Beauty in Jan 15. Bonjour
Beauty operates beauty salons, medical beauty shops and massage shops in
China, Hong Kong and Macau. In 2014, client visits reached 297,478 and
average spending per client was HK$1,186.15. Bonjour Beauty’s key
businesses include:
Integration with Bonjour Beauty
a) 11 beauty salons providing slimming, medical beauty care, manicure, spa &
massage services under the About Beauty brand in Hong Kong and Macau, and
under the Bonjour Beauty brand in Shanghai, China.
b) three skin care clinics providing dermatology treatment and micro-cosmetic
beauty treatment, including Ulthera, Thermage, Fraxel Dual and Botox under
the Dr. Protalk brand. The medical devices and technology used by Dr. Protalk
have received US FDA and CE approval.
c) two massage shops offering foot and body massage services under the Top
Comfort brand in Hong Kong.
Improving profitability of Bonjour Beauty
.
Bonjour Beauty has a large customer base, which could become a client referral
pool for Town Health’s planned cosmetic dermatology medical center. In 201214, Bonjour closed unprofitable beauty salons. Almost all unprofitable salons
have been closed by Bonjour Beauty, which will focus on developing highmargin businesses from 2015. Skin care business, which is operated by
doctors, has a relatively high net margin of over 30% while the net margin of the
beauty care business is less than 12%, according to management. Doctoroperated skin care services contributed to only 16% of segmental income in
2014. In 2015, Town Health plans to set up a plastic surgery center in Central or
Causeway Bay and a medical dermatology center in Mongkok. Management
expects the new medical centers to start operating in 2015 and break even in
2016. Town Health also plans to offer plastic surgery and medical dermatology
treatment, including plastic surgery treatments, and targets to increase such
revenue by more 30% and raise overall net profit margin to more than 20%.
Town Health also plans to offer plastic surgery and medical dermatology
services to mainland tourists. Its long history of established healthcare and
professional medical team are competitive advantages.
Figure 6: Breakdown of Bonjour Beauty
Source: Company Data, CGIH
7
Huge growth opportunity in China
The aesthetic medical services industry in China is highly fragmented with more
than 24,000 treatment centers and clinic and no single player owning more than
5% of total market share in terms of turnover in 2013. Market participants
include privately-owned single-site operators, privately-owned chain operators,
public hospitals with aesthetic medical departments and beauty salons that are
unlicensed to perform medical procedures. The government-owned aesthetic
medical centers, privately-owned aesthetic medical centers and beauty salons
had about 35%, 48% and 17% market share of the aesthetic medical market by
turnover in 2013, respectively. Of the privately-owned operators, multi-site
operators had about 23% market share by revenues in 2013. The remaining
25% market share by revenues was spread amongst the estimated 11,000
single-site operators.
Figure 7: Market share by types of Aesthetic Medical Treatment Operators by 2013
Beauty Salons
17%
Governmentowned
35%
Privatelyowned multisite operators
23%
Privatelyowned singlesite operaors
25%
Source: Frost & Sullivan Analysis, CGIH
Big players to be winners
It is expected that government will launch more stringent regulations, higher
qualification requirements for surgeons, stronger emphasis on safety of services
as well as greater capital needs for advanced treatment equipment as the sector
continues to grow. The change in regulatory regime will favor the large aesthetic
medical treatment center operators relative to the privately-owned single-site
operates and will likely lead to the consolidation of small aesthetic medical
operators while creating a much higher entry barrier for new entrants.
8
Figure 8: Bonjour Beauty Revenue
Figure 9: Bonjour Beauty Net Profit
HK$m
HK$m
360
35.5
348
350
340
34.5
330
34
310
34
33.5
315
320
35
35
33
301
32.5
300
32
32
290
31.5
280
31
270
30.5
2012
2013
Source: Company Data, CGIH
Investment in pharmaceutical segment
2014
2012
2013
2014
Source: Company Data, CGIH
Town Health has invested in the pharmaceutical segment through New Ray
Medicine International Holding Limited [8180.HK] (New Ray Medicine) in 2013.
New Ray Medicine procures pharmaceutical products from 31 suppliers and
sells 49 pharmaceutical products & s medical devices through a network of 124
distributors customers spreading over 19 regions in China. New Ray Medicine
has successfully promoted its products to around 800 hospitals through the last
tendering process in Zhejiang Province. Its reliable supply chain network and
extensive distributorship allows its products to penetrate into different niche
markets effectively.
9
China market is 2nd largest in the world
Medical reform is needed
Growth opportunity to Town Health
China is now the second largest healthcare services market in the world.
However, the China healthcare market is under-developed comparing with
developed countries and there is huge room for growth. Town Health will
continue to expand its businesses into China healthcare market grasping the
new investment and development opportunities opened up to private
institutions. As 90% of in-patient and out-patient services are provided by public
hospitals in China, China government is currently promoting the transformation
of public hospitals and supporting the development of private hospital in order to
establish a basic and universal healthcare system that can provide safe,
effective, convenient and low-cost services to all people. China medical industry
has been developing quickly in recent years, as a result of the market demand
and steadfast health care reform. The number of Chinese hospitals grew at a
CAGR of 6% in 2011 to 2013, higher than 2.26% in 2005 to 2010. Revenue of
China hospital industry increased at a CAGR of 17.9% in 2011 to 2013, and it is
expected to maintain the growth rate of over 16% in 2013-2017.
China
Healthcare
Industry
Development
Report
2014,《中国医疗卫生事业发展报告2014》suggests that China’s Medical
Insurance Fund will have a deficit of RMB735bn by 2024 if there is no major
reform of healthcare system. The deficit is caused by: a) economic slow down
and b) increasing spending given aging population. Government spending
accounted for 30.1% of total healthcare spending in 2013, up from 27.5% in
2009. Healthcare spending grew at a CAGR of 13.2% in 2011-2014, much
faster than GDP growth and reached RMB3.2trn in 2014. The report also
recommend that: a) improvement in efficient of the healthcare system and b)
building up the private healthcare system are the solutions to the issue.
Town Health is actively seeking opportunities of to acquire public hospitals for
reform. In the long run, cooperation with China Life Group can provide the
Group with strong network and financial support in acquiring mainland public
hospitals. Town Health can work jointly with China Life Group in developing new
medical insurance products including healthcheck insurance schemes and highend health check packages for VIP customers.
The co-operation with China Life Group will also allow Town Health to explore
business opportunities in areas including managed care business in China and
developing old age homes and rehabilitation healthcare services. The Group is
investing to offer high-end dental services in China.
Town Health targets to provide high-end dental services, especially Invisalign
services. The group operates 11 dental clinics in Hong Kong and is now
investing in the establishment of an Invisalign training center in Hangzhou,
offering high-end Invisalign training and clinical services, as well as other highend dental services such as Dental Implants. Town Health aims at offering Hong
Kong branded high-end dental services in China with a view to establishing a
local chain dental hospitals/clinics.
10
Figure 10: China healthcare spending is growing fast in 2011-2013
Figure 11: Healthcare spending in China
RMB bn
20.00%
%
Healthcare spending
7000
7.0%
Healthcare spending as % of GDP
15.00%
6000
10.00%
5000
5.0%
4000
4.0%
3000
3.0%
2000
2.0%
1000
1.0%
5.00%
0.00%
China
India
Russian Federation
Bazil
US
Source: Frost & Sullivan Analysis, CGIH
UK
Germany
France
Japan
Italy
-5.00%
0
6.0%
0.0%
2009 2010 2011 2012 2013 2014F 2015F 2016F 2017F 2018F
Source: Frost & Sullivan Analysis, CGIH
11
Town Health cooperates with Sun Yat-sen University to provide laboratory and
high-end imaging diagnostic services for the Sixth Affiliated Hospital of Sun-Yatsen University.
One of the beneficiaries of hospital reform
Town Health announced the acquisition of 49% of Huayao for RMB151.3m on
17 Mar 15. Huayao indirectly owns Hangzhou Shengkang Hospital and
Hangzhou Shuke Medical Clinic. The seller of Huayao has guaranteed audited
profits (excluding non-recurring and exceptional gains) of not less than
RMB30m, RMB36m and RMB42m in 2015-17, implying YoY growth of 20% and
16.7% in 2016 and 2017 respectively.
a) Shengkang Hospital is a Class II for-profit private hospital located on Jiubao
Street in Jianggan District, Hangzhou City. There are many large enterprises,
including Xizi Otis and Youcan Group, near the hospital. It is a designated
hospital for Hangzhou City Basic Medical Insurance, Zhejiang Province Basic
Medical Insurance and Employment Injury Insurance in Hangzhou. The hospital
has 99 doctors, 460 beds and medical equipment including MRI. It provides
general medical services with a strong focus on orthopedics and rehabilitation
care. Hospital bed utilisation rate was about 68% in 2H14.
b) Shuke Medical Clinic is an outpatient medical clinic providing traditional
Chinese medical care, Western internal medicine healthcare and dental care
services. The clinic is located in Xiacheng District, one of the main residential
areas in Hangzhou. The clinic has 20 doctors, serves around 150 outpatients
per day and contributes revenue of RMB5m per month.
With the completion of renovations at its inpatient building in May-Jun 14, fullyear contribution of inpatient services is expected to boost Shengkang
Hospital’s revenue in 2015. In addition, the hospital is recruiting medical experts
from other hospitals in Hangzhou and other cities in Zhejiang province.
Town Heath’s management also plans to increase the number of rehabilitation
patients by cooperating with public hospitals in Hangzhou, as large hospitals
need to transfer out rehabilitation patients to make room for patients that need
surgery. Management expects facility and technology upgrade as well as
cooperation with large hospitals to help boost revenue and profit for the
Shengkang hospital.
Town Health and the other shareholders of Huayao will contribute a total of
RMB120m to acquire or develop three more clinics in 2015-16. Huayao is also
seeking to acquire other hospitals in Zhejiang and other provinces.
.
12
Strong support from China Life Insurance
Group
On 5 Jan 2015, Town Health announced that at a subscription price of HK$0.98
per share subscription share, China Life Group’s would subscribe to
1,785,098,644 subscription shares. According to investment agreement, for a
period of one year from completion date, China Life Group undertakes to Town
Health not to dispose of, or to enter into, any agreement or arrangement to
dispose of the subscription shares, except in special circumstances stated
under the agreement.
Gross proceeds from China Life Group’s investment is approximately
HK$1.75bn, which will be applied for the purpose of the Town Health’s
investment, acquisition or development of medical and/or healthcare related
businesses in China. The Group could forge a strong strategic partnership
relationship with China Life Group and make use of its extensive network in
mainland medical and government sectors to accelerate the Group’s venturing
into the China healthcare market, in particular acquisition and reform of public
hospitals. Further, the Group could develop together with China Life Group in
offering insurance related services like health check or laboratory testing
services in China. The commercial medical insurance market in China is still in
the primitive stage, and has therefore much room for growing. The group hopes
to work with China Life Group in exploring and developing the medical
insurance market in China. The establishment of specialty centers by Town
Health will aid the development of a cross-border medical specialty platform
leading to the development of medical tourism, especially for China Life Group’s
clients. Town Health strives to develop medical tourism business by tapping the
huge clientele pool of China Life Group, so that more customers from China
could enjoy quality medical and healthcare services in Hong Kong.
.
Figure 12: Share holding structure after share placement
Source: Company Data, CGIH
13
Figure 13: Healthcare tourism
Source: Company Data, CGIH
O2O Platform for offering more services
Town Health is also developing a mobile healthcare O2O platform, One-Pass,
by forming a 60/40 JV with SINO Dynamic. The O2O platform will be used for
integration of business units and affiliated companies under Town Health. Town
Health also invite parties to join the platform for enriching content and boosting
traffic.
Town Health targets to launch it mobile healthcare O2O platform in Jun15. This
will allow customers to make appointments for physician visits, health checkups, and beauty services, which should improve efficiency and enhance
customer loyalty.
14
Figure 14: Peer Comparisons
Ticker
Company
3886 HK
Town Health
587 HK
Hua Han Bio
1515 HK
Phoenix Healthcare
300015 CH
Aier Eye Hospital
KANG US
Ikang Healthcare
MR US
Mindray Medical
CO US
China Cord Blood
CBPO US
China Biologic Products
CCM US
Concord Medical
Price
Lcy
Market Cap
US$m
2015F
x
PE
2016F
x
2017F
x
2015F
x
2.4
2.3
15.2
42.0
17.4
31.8
6.4
99.7
7.0
1711.3
1452.2
1635.2
4436.3
1127.3
3725.8
468.7
2473.0
312.8
117.8
86.1
108.0
130.3
59.5
70.9
57.7
63.0
76.3
62.9
47.5
35.1
52.0
24.0
49.4
34.1
27.6
44.6
20.6
5.1
3685.0
n.a.
1.2
0.8
77.5
121.1
73.0
39.2
50.6
54.4
77.0
4.3
6.0
153.0
n.a.
64.1
112110.9
62763.6
37687.0
33672.0
12337.5
8425.6
4434.8
3145.9
10967.9
4516.5
1863.9
974.4
904.3
1134.2
786.1
606.6
303.9
422.5
6408.1
2021.5
676.1
n.a.
222.3
445.1
32524.1
11995.3
7008.2
7235.8
5015.2
6421.0
3409.7
1211.5
13428.9
3433.3
n.a.
10012.2
n.a.
20.8
39.4
66.8
30.4
17.6
26.8
29.8
13.1
30.6
18.8
15.9
15.0
15.4
23.2
27.1
18.0
25.3
16.0
24.0
16.1
17.5
23.6
26.7
27.3
21.1
21.5
21.8
20.6
19.4
19.4
n.a.
30.4
48.1
15.6
18.9
20.7
26.8
25.8
13.9
19.4
31.3
50.9
35.8
n.a.
32.1
23.6
n.a.
16.4
29.9
50.9
22.0
16.0
30.6
24.6
12.0
25.3
16.5
14.3
13.4
13.9
20.4
23.5
14.8
18.3
14.8
21.2
13.8
15.0
21.3
22.3
22.7
18.6
19.4
19.6
17.9
17.5
17.7
n.a.
26.3
36.7
14.0
17.4
18.6
23.0
18.9
12.2
17.9
29.1
41.9
30.7
n.a.
27.3
20.3
n.a.
13.5
23.8
37.4
18.2
15.2
21.8
21.0
n.a.
21.5
14.3
12.9
12.2
12.0
18.0
20.4
12.3
14.9
13.6
18.2
13.6
12.8
16.8
20.2
17.7
14.8
n.a.
n.a.
16.6
16.7
16.0
n.a.
24.6
35.0
12.7
15.9
16.9
19.4
14.9
11.3
17.5
26.9
34.6
29.1
n.a.
24.1
18.0
n.a.
11.5
26.8
37.6
16.6
10.7
4.5
16.0
3.1
15.8
9.5
10.6
8.8
9.5
13.6
10.2
3.9
3.2
9.6
14.4
8.4
8.1
13.4
11.0
10.2
10.5
10.7
11.9
13.4
9.0
4.8
n.a.
35.4
26.2
8.2
9.7
12.7
13.6
8.0
7.6
7.8
15.5
23.9
21.1
n.a.
14.6
12.0
Average
UNH US
Unitedhealth Group
ESRX US
Express Scripts
AET US
Aetna
CI US
Cigna
CTRX US
Catamaran
CNC US
Centene
HNT US
Health Net
MOH US
Molina Healthcare
DGX US
Quest Diagnostics
TMH US
Team Health
AIRM US
Air Methods
BRLI US
Bio-Reference Labs
IPCM US
IPC Healthcare
AHS US
Amn Healthcare Services
PRSC US
Providence Service
LHCG US
LHC Group
ADUS US
Addus Homecare
AFAM US
Almost Family
SHL AU
Sonic Healthcare
PRY AU
Primary Health Care
4694 JP
BML
FAB MK
Faber Group
CLGL SP
Cordlife Group
QNM SP
Q & M Dental Group
HCA US
HCA
UHS US
Universal Health Services
MD US
Mednax
EVHC US
Envision Healthcare
THC US
Tenet Healthcare
CYH US
Community Health Systems
LPNT US
Lifepoint Hospitals
KPJ MK
KPJ Healthcare
IHH MK
IHH Healthcare
BH TB
Bumrungrad Hospital
BGH TB
Bangkok Dusit Med
RHC AU
Ramsay Health Care
Average
HSI Index
HSCEI Index
SHCOMP Index
EV/EBITDA
2016F
2017F
x
x
n.a.
9.0
19.6
30.8
12.8
9.7
4.6
15.2
3.5
13.1
8.5
10.2
8.2
8.8
12.2
8.9
3.3
2.5
9.4
12.8
7.6
7.2
12.0
9.8
8.3
9.3
9.8
10.7
12.0
8.5
4.7
n.a.
29.4
20.9
7.8
9.1
11.5
11.9
7.5
7.2
7.4
13.9
20.7
18.4
n.a.
12.5
10.7
n.a.
7.5
13.9
24.0
10.1
10.4
4.0
13.4
n.a.
11.9
7.9
9.7
7.5
7.8
11.0
7.8
2.9
2.2
8.8
11.3
7.3
n.a.
9.4
n.a.
7.6
7.2
n.a.
n.a.
11.2
8.1
4.5
n.a.
25.9
19.7
7.4
8.5
10.5
10.4
7.1
6.9
7.2
12.9
18.0
16.3
n.a.
11.5
9.8
2014
x
P/B
2015F
x
2014
%
ROE
2015F
%
2014
%
ROA
2015F
%
Div yield
2014
2015F
%
%
5.7
2.1
6.2
12.9
n.a.
2.3
1.9
11.7
1.1
5.5
3.5
3.1
2.6
3.1
n.a.
4.8
2.6
3.1
2.6
10.7
3.9
3.0
2.4
4.4
3.8
1.8
2.4
1.9
2.6
1.0
1.3
n.a.
2.4
7.8
n.a.
3.2
3.1
4.1
7.6
1.6
1.6
3.4
2.5
10.2
n.a.
8.6
3.8
n.a.
n.a.
5.5
11.2
3.4
2.1
n.a.
7.6
0.5
5.0
3.2
3.3
2.4
2.8
2.2
3.1
2.3
2.7
2.4
8.5
3.2
n.a.
2.3
4.6
n.a.
1.7
n.a.
n.a.
2.5
1.0
1.4
n.a.
2.2
7.3
n.a.
2.8
2.7
3.8
5.5
1.4
1.5
3.2
2.4
9.1
n.a.
7.4
3.4
5.1
5.3
8.6
14.1
n.a.
15.8
9.3
25.2
4.2
10.8
17.8
8.2
15.7
14.5
5.5
15.1
10.7
6.3
20.9
44.5
18.7
18.4
14.5
16.5
15.2
8.0
18.4
3.9
12.2
5.7
7.5
11.6
18.1
17.2
n.a.
17.1
12.8
0.6
-14.1
4.9
6.0
9.7
3.6
27.8
16.2
20.5
12.9
n.a.
9.5
14.4
17.8
12.3
12.1
n.a.
32.5
0.0
14.1
17.4
20.0
16.0
18.7
10.0
15.3
13.4
11.3
14.1
31.5
21.4
12.1
10.1
15.6
n.a.
9.0
9.7
n.a.
12.8
5.6
7.1
19.2
6.8
15.6
-32.0
15.9
14.1
11.8
25.7
11.4
7.9
10.7
4.8
27.8
17.6
22.5
13.2
n.a.
6.7
11.1
13.6
n.a.
7.8
3.5
16.7
3.5
9.0
6.8
3.7
4.0
3.8
3.7
5.8
3.1
1.7
5.9
5.9
7.3
n.a.
6.7
5.2
2.6
4.8
7.1
3.9
6.4
3.5
4.9
5.8
4.7
8.1
6.2
6.3
9.6
2.8
0.1
0.4
2.3
4.5
2.7
15.0
8.7
5.8
5.1
n.a.
n.a.
10.5
14.3
9.5
7.9
n.a.
n.a.
n.a.
10.6
6.5
4.9
4.5
3.8
4.8
5.1
4.0
2.4
6.4
5.9
n.a.
n.a.
6.2
5.9
n.a.
6.1
n.a.
n.a.
8.3
4.8
4.3
8.8
3.8
8.5
7.2
7.4
8.7
5.0
1.3
1.7
3.2
4.3
3.2
16.6
9.5
9.7
5.9
0.0
1.3
1.1
n.a.
n.a.
1.6
0.0
0.0
10.3
2.0
1.3
0.0
0.9
0.0
n.a.
0.0
0.0
0.0
1.7
0.0
0.0
n.a.
0.0
0.0
0.0
0.0
0.0
0.0
3.3
3.9
n.a.
n.a.
n.a.
n.a.
0.0
0.2
0.0
0.0
0.0
0.0
0.0
1.8
n.a.
n.a.
n.a.
1.4
0.5
n.a.
1.3
0.7
0.3
0.0
1.4
n.a.
n.a.
n.a.
0.8
1.4
0.0
0.9
0.0
0.0
0.0
0.0
0.0
2.0
0.0
n.a.
n.a.
0.0
0.0
n.a.
n.a.
n.a.
n.a.
3.5
3.8
1.6
n.a.
1.7
1.2
0.0
0.3
0.0
0.0
0.0
0.0
0.0
1.6
0.5
1.5
n.a.
1.6
0.8
1M
%
-8.5
33.1
15.2
20.3
3.8
17.9
3.5
15.5
2.5
11.5
-1.0
0.9
-1.2
1.4
19.9
0.6
-5.7
-3.0
-1.3
6.0
-2.3
-0.1
10.9
8.9
-3.1
4.9
18.6
11.2
2.3
1.0
1.2
n.a.
13.2
43.9
-0.1
-0.2
-0.2
1.3
-2.9
-0.5
-0.8
5.5
2.4
3.0
n.a.
-4.4
3.8
13.6
18.9
19.7
Share Price Performance
3M
6M
%
%
55.9
19.9
8.0
29.4
1.1
17.8
42.7
45.9
-5.3
23.9
5.2
1.6
14.3
18.4
14.2
28.4
3.0
22.3
7.6
18.4
13.8
5.2
24.5
22.5
28.9
13.8
20.9
40.9
10.9
13.4
17.3
n.a.
29.8
54.0
13.0
13.7
11.4
13.4
15.3
13.4
13.2
10.4
14.2
-4.1
n.a.
9.9
16.3
12.0
18.1
31.7
86.6
4.1
20.3
57.7
-8.3
8.5
27.9
82.3
-5.0
30.4
29.9
17.9
37.1
41.2
42.5
70.9
19.7
38.6
21.3
2.5
4.2
19.9
32.3
43.7
21.3
45.8
52.3
62.5
13.4
13.7
24.8
n.a.
12.7
90.4
8.6
13.6
31.6
12.2
-12.9
-3.6
8.8
11.3
20.9
19.5
n.a.
25.5
26.3
19.3
38.7
91.7
12M
%
119.0
54.4
21.6
76.1
28.1
-1.9
49.3
148.2
6.8
55.7
56.4
21.4
56.7
68.4
52.3
117.6
75.0
73.7
30.7
40.8
-11.4
29.6
7.5
87.1
20.4
60.6
22.8
109.1
16.8
8.3
-5.2
n.a.
-0.9
92.5
53.8
58.1
21.7
21.3
20.3
45.4
45.0
30.0
49.9
56.5
n.a.
39.4
43.3
23.6
46.2
113.5
Source: Bloomberg, CGIH
15
Income Statement (HKDm)
Revenue
FY2011
FY2012
339
Growth YoY%
Cost of Sales
(225)
Gross profit
114
Growth YoY%
Administrative Expenses
FY2013
FY2014
Cash Flow Statement (HKDm)
342
355
495
0.7%
3.7%
39.5%
(223)
(234)
(334)
119
120
161
3.9%
1.2%
33.6%
(192)
(184)
(200)
(236)
Fair Value Changes on Investment Properties
22
79
55
5
Share of Profit/loss of Associates
44
Profit/loss before Taxation
Depreciation & Amort.
Fair value change/Impairment
Change in Working Capital
Change in Held for trading investment
Change in interest income
(328)
0
266
77
(110)
304
(7)
(134)
242
18
98
154
-
-
4
(47)
(2)
14
(6)
2
Sale of Property, Plant, and Equipment
Other Gain/loss
135
(447)
(120)
13
Finance Costs
(2)
(4)
(9)
(8)
Other Income
20
17
54
38
Change in Investing Acitivities
Cash from Investing
Net increase in bank borrowings
Issuance of Common Stock
Common Dividends Paid
Other Financing Activities
Taxes and Other Expenses
Provision for Income Tax
(49)
(3)
(4)
62
Minority Interest (After Tax)
(2)
(4)
(30)
4
Net Income (Loss)
64
(435)
50
85
-777.3% -111.4%
70.5%
Growth YoY%
Income Statement (HKDm)
FY2011
FY2012
FY2013
20
(207)
(24)
-
0
8
310
3
Capital Expenditure
-
19
(20)
(273)
(87)
-
Gain/(Loss) on Dilution of Interest in Associates/an Associate
2
(302)
(13)
28
83
244
(382)
160
0
38
(137)
(1)
3
(428)
41
173
(9)
1
83
32
(3)
-
115
(428)
FY2013
(286)
17
Earnings before Taxes
115
FY2012
Cash from Ops.
Gain on Disposal of Associates
Gain/loss on Disposal of a Subsidiary
FY2011
Cash from Financing
Net Change in Cash
Effect of Foreign Exchange Rate Change
1
(5)
(8)
(28)
91
164
(323)
130
25
-
-
1
FY2014
ASSETS
Cash and Bank Balance
46
176
201
1,079
Investments Held for Trading
903
314
661
278
Trade and Other Receivables
45
41
45
148
Inventories
12
10
12
16
9
13
96
40
27
86
147
35
1,042
641
1,163
1,596
Property, Plant and Equipment
183
163
172
194
Investment Properties
284
573
448
285
Goodwill
7
7
15
200
Intangible Assets
-
-
-
236
281
289
215
314
755
1,032
850
1,229
1,797
1,673
2,013
2,824
Loans Receivable
Other Current Assets
Total Current Assets
Other Long-Term Assets
Total Non Current Assets
Total Assets
LIABILITIES & EQUITY
Trade and Other Payables
29
34
58
125
113
211
364
63
Tax Payables
85
84
82
17
Other Current Liabilities
16
5
12
147
243
334
516
352
Bank Borrowing
Total Current Liabilities
Non Current Liabilities
Deferred Tax Liabilities
1
2
3
13
Minority Interest
6
210
284
345
Preferred Stock Convertible
Total Liabilities
Common Stock - Par Value
-
-
-
4
250
545
803
713
9
9
9
51
Reserves
1,538
1,119
1,200
2,061
Total Shareholders Equity
1,547
1,128
1,209
2,115
Total Liabilities & Shareholders Equity
1,797
1,673
2,013
2,824
16
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Explanation on Equity Ratings
BUY
: share price will increase by >20% within 12 months in absolute terms
SELL
: share price will decrease by >20% within 12 months in absolute terms
HOLD
: no clear catalyst, and downgraded from BUY pending clearer signal to reinstate BUY or further downgrade to outright SELL
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17