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会员
机构：中金公司
研究员：Zhuonan XU/Yanyin ZHU/Junhao FAN
EC Healthcare announced its agreement with KaiLong Group （a real estate investment management company） and Asia Allied Infrastructure Holdings Ltd （a leading construction contractor in Hong Kong SAR） to establish a joint venture to jointly construct a specialized medical-grade building （hereinafter “the Building”） in Hong Kong’s core commercial district of Tsim Sha Tsui. EC Healthcare expects to complete the construction of the Building in 4Q24. We believe this will strengthen the firm’s medical services and its competitive advantages in one-stop medical aesthetics and healthcare solutions.
Comments
Partners with real estate businesses to establish a JV for the construction of a specialized medical-grade building. Healthy Cameron, an indirect wholly-owned subsidiary of EC Healthcare, plans to subscribe for 30% stake in the JV （incl. allotment and subscription of shares） at no more than HK$275mn. The JV will construct a specialized medical-grade building in the core commercial district of Tsim Sha Tsui on Cameron Road, with an estimated lettable floor area of around 9,569 sqm （total operating GFA at 42,000 sqm as of 1HFY22）。 EC Healthcare plans to be the main lessee of the Building for an initial term of 5 years following its completion, with an option to renew the lease for another 5 years. In addition, the company plans to consolidate its scattered clinics across different buildings in Kowloon to enhance its medical service quality and overall operational efficiency.
Cross-sector collaboration likely to drive mutual growth. EC Healthcare has continued to expand through cross-sector collaborations. We believe its alliance with property partners will likely enable mutual empowerment of medical and real estate industries. We think the opening of new centers under EC Healthcare’s medium- and high-end brands in the Building will create additional value to the real estate project. On the other hand, the company, as the shareholder of the JV, will be able to customize medical space configurations in the Building to accommodate specialized medical equipment. We expect this innovative model to enhance the Building’s appeal to customers and its service quality, thereby strengthening the company’s competitive advantage in the medical aesthetics and healthcare market in Hong Kong SAR. Meanwhile, EC Healthcare also has the naming rights to the Building, which we believe will help increase the company’s brand awareness.
Demand likely to recover rapidly as COVID-19 eases; upbeat on EC Healthcare building a leading platform offering one-stop medical aesthetics and healthcare services. COVID-19 conditions in Hong Kong SAR have notably eased. This, coupled with the distribution of e-coupons by Hong Kong SAR government to boost consumption, may drive rapid demand recovery for EC Healthcare in 1QFY23 （April-June 2022）， in our view. On the Chinese mainland, we expect the company’s offline store operation and expansion to gradually normalize amid work and business resumption in Shanghai. In addition, the firm has made steady progress in implementing its development strategy of organic growth and external expansion. The firm continues to diversify and expand its businesses, by opening new medical service centers in Fung House in Central District and Taikoo Shing, and acquiring a veterinary hospital in the Tai Po district, Mobile Medical and Mobile Medical Health Group. Therefore, we remain upbeat on the firm’s prospect of building a leading platform offering one-stop medical aesthetics and healthcare services in the Greater Bay Area.
Financials and valuation
We maintain our earnings forecasts. The stock is trading at 19x FY23e and 14x FY24e P/E. We maintain an OUTPERFORM rating and our TP of HK$10.6, implying 26x FY23e and 19x FY24e P/E, offering 36% upside.
Risks
COVID-19 resurgence; intensified competition; medical accidents; regulatory headwinds; goodwill impairment.