Phoenix share sale likely to be big draw
Ageing population, urbanisation and rising incomes on the mainland will attract investors to the float of the Beijing health-care group
Phoenix Healthcare, the first mainland hospital group seeking a listing in Hong Kong, is tipped to be a front runner when it opens its retail book today, along with two other listing candidates.
An ageing population, urbanisation and rising incomes on the mainland will attract investors to the float of the Beijing-based health-care group, say fund managers.
The group's 12 hospitals and 28 clinics in the capital could be a big net-revenue-spinner, especially after the removal of a clause that would have made it liable to compensate its three major investors if earnings for this year and next failed to meet an agreed level.
Alex Wong Kwok-ying, a fund manager at Ample Capital, said the listing would help affirm Phoenix's leading position on the mainland and bring down its labour costs, which had weighed on its gross margins amid fierce competition for talent.
"It now has the capital to expand its network, and it can offer options as well as cash to draw talent," he said.
While the group's net profit grew an annual average of 50.3 per cent in the three years to 2012, the gross margin of its most profitable hospital management business almost halved to 29.6 per cent from 52.1 per cent in the first six months of this year.
Chief financial officer Jiang Tianfan said the decline was mainly due to the amortisation of investments for the nine hospitals it had acquired over the past three years. But the amortisation was coming to an end, he added, and the sector's gross margin level should rebound by next year.
Phoenix will offer the retail market 201 million shares at HK$5.88 to HK$7.38 each.
Also on offer from today are ceramic tile and bathroom product trader Dongpeng and Hebei-based iron-ore miner Hengshi Mining Investments, which will offer their shares at a maximum price of HK$4.55 and HK$3.40 respectively.
People close to the deals said Phoenix's global offering might be oversubscribed.
Louis Wong of Phillips Securities said Dongpeng, being the first mainland ceramic tile trader to list in Hong Kong, looked an attractive proposition, especially since urbanisation in the country would boost demand for household furnishing.
Dongpeng, which is venturing into the bathroom product market, priced its offering at up to 13 times forecast earnings, against the 9.72 times earnings at which another bathroom product maker, Bolina, was trading at Friday's close.
Analysts were less enthusiastic about the float of Hengshi, however, citing sluggish demand and prices for iron ore.
Demand for iron ore on the mainland is expected to rise after inventory hit a low earlier this year, but most of it is likely to be satisfied by imports as steelmakers seek to boost product quality.
