“Science and Technology Innovation Board Daily”, April 9 (Reporter Zheng Bingxun) Following the US-China Jiahe and Shulan Healthcare, another private hospital hit a Hong Kong stock IPO this year.

Recently, BenQ Hospitals Group Co., Ltd. (hereinafter referred to as “BenQ Hospital”) officially submitted its IPO documents to the Hong Kong Stock Exchange. The co-sponsors are CICC and Citibank.

According to the plan, the funds raised from BenQ Hospitals' IPO will be used to expand and upgrade existing hospitals, fund “smart hospitals,” invest in mergers and acquisitions, and use as working capital.

According to the IPO documents, BenQ Hospital is a mainland private for-profit general hospital group based on advanced hospital operation and management experience in Taiwan. It owns two general hospitals — Nanjing BenQ Hospital and Suzhou BenQ Hospital. By the end of 2023, BenQ Hospital had a total operating area of 380,000 square meters and 1,850 registered beds.

Among them, Nanjing BenQ Hospital began operation in 2008 and has been rated as a grade 3 A hospital since 2022. It is the first private hospital in Nanjing City, Jiangsu Province to receive the top three ratings. After 5 years of operation at Nanjing BenQ Hospital, Suzhou BenQ Hospital began operation and is currently ranked as a tertiary general hospital.

Due to the earlier operating period, the current overall revenue of Nanjing BenQ is significantly higher than that of Suzhou BenQ. In 2021-2023 (the “reporting period”), BenQ Hospital achieved revenue of 2,224 billion yuan, 2,336 billion yuan, and 2,688 billion yuan, and net profit of 69.075 million yuan, 89.55 million yuan, and 167 million yuan. During this period, revenue from Nanjing BenQ was 1,442 billion yuan, 2,336 billion yuan, and 2,688 billion yuan respectively, accounting for 64.8%, 62.2%, and 63.5% of the Group's revenue.

According to the treatment process, BenQ Hospital's medical services are divided into two categories: inpatient medical services and outpatient medical services. The former contributed revenue of 1,176 billion yuan, 1.02 billion yuan, and 1,396 billion yuan respectively during the reporting period, accounting for 52.9%, 51.4%, and 51.9%, while the latter's revenue was 1,019 billion yuan, 1,104 billion yuan, and 1,263 billion yuan, accounting for 45.8%, 47.3%, and 47.0%.

According to Frost & Sullivan statistics, if the revenue generated from medical services in 2022 is calculated, BenQ Hospital is the largest private commercial general hospital group in East China, and its revenue exceeds the sum of the second and third places. At the same time, BenQ Hospital also ranks fifth among private for-profit general hospital groups in the country. During the same period, Nanjing BenQ was the largest private for-profit general hospital in Jiangsu, ranking fourth in the country.

By the end of 2023, Nanjing BenQ had established a number of key specialties and specialty disciplines, including 1 national clinical key specialist thoracic surgery, 1 Jiangsu clinical key specialist medical imaging department, 1 Jiangsu clinical key specialist construction unit urology, and 16 key medical specialties in Nanjing. Suzhou BenQ is a certified unit for China's national chest pain center, atrial fibrillation center, and a national stroke prevention center.

Benefiting from growing medical demand and the increasing improvement of private hospitals, BenQ Hospital has a broad market space. Frost & Sullivan data shows that in 2017-2022, the market size of private hospitals in China will increase from 319.1 billion yuan to 607.4 billion yuan, with a compound annual growth rate of 13.7%. In the same period, the public hospital market size will increase from 2.55 trillion yuan to 3.71 trillion yuan, with a compound annual growth rate of 7.8%.

However, at the same time, the number of private hospitals also increased from 20,977 in 2018 to 25,230 in 2022. In the same period, the number of public hospitals dropped slightly from 1,032 to 11,746. The rapidly growing number of private hospitals, which share far less than the market share of public hospitals, will undoubtedly put intense competitive pressure on the industry.

As a result, BenQ Hospital stated in the IPO document that it is in a highly competitive industry, and if it fails to compete successfully with other hospitals and medical suppliers, it may affect profitability and market share.

In fact, even if BenQ Hospitals intends to further expand the scale of operations domestically in the future, its scope is limited by relevant regulations.

For example, the “Foreign Investment Law”, which came into effect in 2020, stipulates that foreign-invested entities engaged in restricted industries must obtain market entry permits and other approvals from relevant Chinese government departments; in 2010, the Ministry of Health and the Ministry of Culture issued the “Interim Measures on the Administration of Taiwanese Service Providers Establishing Wholly-Owned Hospitals in Mainland China”, which stipulates that Taiwanese service providers are limited to Shanghai, Jiangsu, Fujian, Guangdong, and Hainan provinces.

▌Controlling shareholder Jiashida suffered a “double kill” in performance

The reason BenQ Hospital is subject to these regulations is that the controlling shareholder behind it is the Taiwanese listed company “Jiashida Technology Co., Ltd.” (2352.TW, hereinafter referred to as “Jiashida”). Up to now, Jiashida has owned 233 million shares of BenQ Hospital through a number of companies, accounting for about 95.02% of the company's total share capital, and has absolute control.

According to the IPO documents, Jiashida is a global technology group spanning the information technology industry, medical services, intelligent solutions and network communication businesses. According to Wind data, between 2021 and 2023, Jiashida achieved revenue of 52,036 billion yuan, 57.058 billion yuan, and 47.157 billion yuan, and net profit of 1.912 billion yuan, 1,886 million yuan, and 689 million yuan. Both showed signs of sharp decline in 2023.

However, BenQ Hospital, as the sole undertaker and brand of the medical service business under Gastar, is seeking a separate listing in this context, and plans to establish a regional medical consortium by strengthening cooperation with primary, secondary, and community medical institutions to gain new business growth points, so it is not difficult to understand.

Judging from the company's development history, BenQ Nanjing and BenQ Suzhou actually started construction before BenQ Hospital in 2003 and 2005, then BenQ Hospital was established in 2009, with a registered share capital of 300 million US dollars. After registration, one share was allotted and distributed to Gastar. On the same day, an additional 123.7 million shares were allotted and issued. BenQ Hospital is owned by Jiashida 89.81% of the shares, while Leader International and Cai Changhai own 8.97% and 1.21% of the shares, respectively.

Since then, BenQ Hospital has gone through a series of equity transfers and capital increases. Up to now, it has five major shareholders. In addition to Jiashida, the controlling shareholder, it has also introduced Shenghong Pharmaceutical (8403.tpex), the second-largest shareholder. Shenghong Pharmaceutical was founded in Taiwan, China and listed in 2011. It is a local comprehensive medical service provider. Currently, it holds 2.15% of BenQ Hospital's shares.

It is worth mentioning that although Jiashida owns an absolute percentage of BenQ Hospital's shares, the latter emphasizes being able to conduct business independently of the controlling shareholder Machine Close Contact. Currently, BenQ Hospital's board of directors consists of 7 directors. After listing, there were no administrative positions at BenQ Hospitals except for 3 non-executive directors who held overlapping positions at Jiashida.

In addition, BenQ Hospital's executive director and CEO is Siu Chak-wing, responsible for overall strategic planning, business direction and operation management. The chairman is Chen Qihong, who is responsible for reviewing the overall enterprise and business development and strategic planning and providing suggestions.

Xiao Zerong graduated from Tamkang University in Taiwan in 1983 with a bachelor's degree in engineering. He has over 35 years of business management experience. Previously, he was responsible for the production and operation of the factory at Youda Optoelectronics (2409.TW). Chen Qihong obtained a bachelor's degree from Chenggong University in 1985 in Taiwan, China, and a master's degree in international management business administration from the Thunderbird School of Global Management in 2001. He has also served as the chairman of BenQ Mitutoyo Healthcare (4116.tPEx) and Youtong Information (2397.TW) since 2010 and 2017, respectively.