The latest entry is China’s largest private psychiatric health-care group by revenue, Wenzhou Kangning Hospital Co., which has started pitching its US$100 million IPO to investors, according to people with knowledge of the deal. It is one of nine health-care companies, six mainland-based, that are waiting for the Hong Kong stock exchange’s approval to proceed.
They are looking to follow the eight—seven mainland-based and one from Hong Kong—that have already listed in Hong Kong this year, raising a total of US$2 billion, according to Dealogic. That is the largest sum since 2011 and almost twice the 2014 total.
Wenzhou Kangning Hospital, based in Wenzhou City in southeastern Zhejiang province, would be the second private hospital group to have a Hong Kong IPO this year. Harmonicare Medical Holding Co Ltd., which specializes in obstetrics and gynecology, raised US$205.1 million in July.
Investors are bullish on the industry in part because of China’s aging population, bankers and analysts say. The number of people over 60 years old is expected to grow to 260 million in 2020 and 480 million in 2050, up from 212 million—15.5% of the population—in 2014. Health-care expenses are forecast to rise to between 6.5% and 7% of gross domestic product in five years, from 5.6% in 2013.
Beijing’s privatization push in the sector is also encouraging investors.
“Health-care reform is one of China’s top priorities as the country aims to expand its health-care system and liberalize the private sector,” said David Suen, managing director of investment banking and head of equity capital markets Asia for J.P. Morgan . “We will see a surge in private clinics, hospitals and cosmetic service providers. That presents lots of opportunities.”
The number of privately owned hospitals, which are seen as both more efficient and providing better care than state-run hospitals, has grown rapidly. In June 2014, 47% of China’s hospitals were privately owned, up from 27% in 2008, according to a May report from Deloitte. China’s National Health and Family Planning Commission last year issued an urgent notice on controlling expansion of public hospitals to leave room for private ones to develop.
Still, private health companies’ earnings growth has slowed in the past year, said David Li, health-care research analyst with BoCom International.
“It is getting difficult for companies to accumulate capital from organic growth, while an IPO is an efficient way to raise funds,” he explained.
In the rush, five of the eight health-care IPOs in Hong Kong this year fell on their debut, according to Dealogic, largely because an overheated stock market in the first half pumped up valuations, which were then hit by the market rout that began in June. Beijing-based Universal Medical Financial & Technical Advisory Services Co. picked a notably hard day for its debut—June 30. It plunged 39%, though it has gained 23% since.
Even after an October revival sent the Hang Seng Index up 8.6%, it is still down nearly 20% from its April peak, while the Shanghai and Shenzhen Indexes are both down more than 30% from their levels four months ago.
“Investors are positive on health-care sector, but they want to look at companies which offer something unique and have a competitive edge,” said Winnie Chiu, senior director of discretionary portfolio management with Crédit Agricole Private Banking. The health-care sector is overweighted in her funds compared with the benchmark, Ms. Chiu said.
Founded in 1996, Kangning Hospital is mainly controlled by individuals, with investments from Defu Fund and CDH Investments. Its total revenue for 2014 was US$46.8 million. It is tentatively scheduled to price the deal on Nov. 13 and start trading Nov. 20, according to people with knowledge of the transaction.
Citigroup and Citic CLSA are joint sponsors, or banks responsible for the IPO.
Source: Wall Street Journal by Kane Wu
No comments:
Post a Comment