Company overview
The company is an operator of residential care homes for the elderly in Hong Kong, providing (I) residential care, professional care and care, nutrition management, medical services and other elderly services; (ii) selling health and medical products, and additional health care services to residents. At present, the company operates a total of eight homes for the elderly, with a total of 1129 places. It is the third largest operator of private residential care homes in Hong Kong by revenue in 2017, with a market share of 1.3%.
The company's customers mainly include the Social Welfare Department and individual clients who pay for accommodation on their own. The average monthly accommodation fee for hostel places purchased by the Social Welfare Department is 8.2 Plus 9.1 / 9.6 thousand Hong Kong dollars (the same below), CAGR 8.2%; the average monthly accommodation fee for individual customers is 10.8 Plus 10.5 / 11.4 thousand yuan, CAGR 2.7%. The average monthly occupancy rate of the company's residential care homes for the elderly is 89%, 93%, 93%.
FY2016-2018, the company's revenue is about 142.4 Universe 150.2 / 156.0 million yuan, CAGR 4.7%.
In 2018, elderly services and goods sales contributed 84.9% and 15.1% of revenue, respectively. The net profit is 33.5 / 36.4 million yuan, the CAGR is 8.7%, and the net interest rate is 21.7max / 33.4 million, respectively.
Industry status and prospects
The number of people over 65 in Hong Kong is expected to grow from 1.266 million in 2018 to 1.524 million in 2022, with a CAGR of 4.8 per cent. Due to the strong demand for hostel places, the average minimum and average maximum charges per hostel place increased at a compound growth rate of 12.6% and 5.9% from 2013 to 2017.
The total income of the residential care industry in Hong Kong increased from 7 billion to HK $10.43 billion in 2017, CAGR10.5%. It is expected to increase to 14.3 billion yuan by 2022 and 6.6% of CAGR in 18-22. Elderly services in Hong Kong are provided by non-private and private residential care homes. As of June 2018, private residential care homes accounted for 67.3% of the residential care places.
Advantages and opportunities
With more than 27 years of business experience, the brand is well-known
Residential care homes for the elderly are located near private and public housing estates
Weakness and risk
The company has been involved in violations of Hong Kong regulatory regulations. If the licence of a residential care home for the elderly is suspended or cancelled, it will not be able to maintain operation.
The properties run by the company in residential care homes for the elderly are all rented, and the residential care home industry in Hong Kong is facing the problem of manpower shortage, which may face the risk of rising rents and rising labor costs.
Investment valuation
Based on the median issue price, the net income of the company is about 123.2 million yuan. Of this amount, 73.8% will be used for the establishment of six new homes for the elderly, 23.3% for upgrading existing facilities, and 1.3% for upgrading IT facilities. This time, Da Quan was introduced as a cornerstone investor to subscribe for about 2.0% of the offering shares. The prospectus reveals that as of March 2019, the unaudited net profit is not less than 36.5 million yuan, corresponding to EPS not less than 3.65 Hong Kong cents, so the share price corresponds to 16.4-17.5 times PE in 2019. Compared with Hong Kong medical service companies China Resources Phoenix Medical (1515.HK), Hong Kong Medical thinking Medical (2138.HK), Kang Hua Medical (3689.HK), the price-to-earnings ratio of 2019 is 14.1x, 14.4x, 8.3x respectively, and the valuation is on the high side, giving IPO a special rating of "5".