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If Excellent Medical Well being Administration Ltd. (OTCPK:PFSMF, 1830.HK) had been a contemporary Hong Kong lady, she would possibly need to go to certainly one of her medical magnificence facilities for surgical procedure to make over her eyes, ears, mouth, and nostril after extra than three years of pandemic ache. She might also want to overlook her ambiguous relationship with the Chinese language mainland, the place her facilities have suffered much more than her core Hong Kong enterprise resulting from relentless closures and regulatory hits.
All that and extra are mirrored in Excellent Medical’s newest annual outcomes for its fiscal 12 months by March, which the corporate launched in late June. Previously often known as Excellent Form, Excellent Medical primarily operates skilled medical magnificence facilities with a core technique of “medical well being + medical magnificence.” The group was based in 2003 and listed in Hong Kong in 2012. It enjoys a excessive profile in its hometown as a result of frequent use of native entertainers and celeb endorsers.
Excellent Medical’s base is Hong Kong, although it has greater than 57 branches in Hong Kong, Macau, and Mainland China. Since altering its identify, the corporate has operated underneath the Excellent Medical model, focusing on mid-to-high-end prospects, together with its more moderen transfer into different markets past its authentic Hong Kong base.
The corporate’s internet revenue elevated by 3.4% to HK$320 million ($41 million) in its newest fiscal 12 months by March, equal to 25.3 cents Hong Kong cents per share, based on its newest report. The corporate proposed a ultimate dividend of 12.3 Hong Kong cents per share, and a particular dividend of 4.7 cents, totaling 17 cents per share. These dividends, mixed with its earlier interim dividend, imply the corporate distributed 30 Hong Kong cents per share as dividends this 12 months, equaling a payout ratio of 118.6%.
Excellent Medical’s annual income elevated by 2.9% in its newest fiscal 12 months to HK$1.39 billion, whereas its working revenue ticked up barely to just about HK$400 million. The corporate carried out poorly on the peak of Hong Kong’s pandemic within the first half of final 12 months, earlier than bettering within the second half with the relief of restrictions that allowed retailers to reopen. Income from its Hong Kong operations rose 6.7% to $1.04 billion, accounting for about three-quarters of the whole.
The medical magnificence enterprise continued to be the corporate’s mainstay, supplying 77.4% of its income, based mostly on the worth of its gross sales contracts. Common consumption per buyer remained at a comparatively excessive degree, together with HK$28,026 for aesthetic medical prospects and HK$23,451 for medical enterprise prospects. Aesthetic medical income rose 7% year-on-year, whereas medical enterprise income fell practically 20%.
Huge potential in “gentle magnificence”
Excellent Medical’s shares hit their highest degree in additional than a month after the outcomes had been introduced, closing up greater than 4% for the day. Regardless of the weak annual income development, bettering developments throughout the 12 months noticed the corporate’s income hit HK$720 million within the second half of its fiscal 12 months, up greater than 8% from the primary half. Income confirmed an analogous development, rising 10% sequentially to hit HK$165 million within the second half.
That appears to point out the corporate was in a position to successfully management prices throughout the troublesome interval, and that the Mainland China and Hong Kong markets started to return to extra regular situations on the finish of final 12 months. The medical aesthetics enterprise was significantly weak throughout the pandemic resulting from its near-complete reliance on offline enterprise, not like broader medical companies, a few of which may very well be moved on-line.
Excellent Medical divides its enterprise into three important segments: aesthetic medical, medical, and sweetness and wellness. Its enterprise is targeted on aesthetic medical, with greater than 75% of its income coming from that section. From the shopper perspective, a lot of its prospects are extra inclined to decide on “gentle” non-surgical procedures which can be the primary focus of Excellent Medical’s aesthetic companies, offering robust potential for future development.
In its medical enterprise, the corporate gives companies like remedies for hair restoration and ache, in addition to routine physicals, aiming to enrich its core medical magnificence companies and thus present a possible new income development.
Excellent Medical can also be notable for its pay as you go mannequin, whereby it sells packages to prospects at reductions for its slimming and sweetness companies. That provides it robust money movement and makes it simpler to scale up or rein in its enterprise relying on market situations. Such pay as you go packages generate a whole lot of thousands and thousands of Hong Kong {dollars} in gross sales every year, protecting the corporate flush with money to avoid wasting or use because it wants.
Residing and dying in Hong Kong
In contrast with different listed friends, Excellent Medical’s enterprise is clearly centered on its house base in Hong Kong, although it’s finding out an enormous post-pandemic growth. It plans so as to add 10 of its “medical + magnificence” service facilities in Hong Kong throughout its present fiscal 12 months, bringing its whole to 32 – up 45%. Nonetheless, some have identified that the corporate’s robust deal with its house market lacks creativeness when such huge potential lies throughout the border in Mainland China.
The corporate’s non-Hong Kong income remains to be comparatively small. That determine fell 6.9% final 12 months to HK$349.2 million, primarily resulting from weak efficiency in Mainland China. In its 2023 fiscal 12 months, Excellent Medical opened solely three Mainland shops within the mega-cities of Guangzhou, Shanghai, and Beijing. It plans to enter different world markets, together with Melbourne and Sydney in Australia, in addition to New York and London. The corporate can also be finding out Singapore, which has comparable consumption patterns to Hong Kong, aiming to copy its success in Lion Metropolis.
Whereas Excellent Medical’s newest report card is hardly stunning, its friends look much more appalling. Magnificence Farm (2373.HK), generally known as the “Hermes of the sweetness trade,” needed to briefly shut its directly-operated shops in lots of main Chinese language cities throughout the pandemic early final 12 months, leading to a pointy 40% decline in its internet revenue. So-Younger (SY), one other medical magnificence companies app, additionally suffered as Beijing clamped down on the native medical magnificence market by banning promoting and different advertising and marketing by unlawful companies.
Excellent Medical’s price-earnings (P/E) ratio at the moment stands at about 16 instances, effectively under the 34 for Magnificence Farm, which can also be listed in Hong Kong. That could be partly as a result of Excellent Medical’s scope is comparatively smaller and geographically restricted. However its technique of utilizing Hong Kong as its base, whereas exploring chosen abroad markets, has turn out to be its saving grace, serving to it keep away from extra unpredictable regulators on the Chinese language Mainland.
Disclosure: None
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Editor’s Notice: The abstract bullets for this text had been chosen by Looking for Alpha editors.
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