20180222-招商证券_香港_-希玛眼科-03309.HK-Eye_master_in_the_house_44页_2mb

Summary of C-MER Eye Care (3309 HK) Company Report

Core Content

C-MER Eye Care is a leading ophthalmology service provider in Hong Kong and Guangdong, specializing in complex disease treatment. The company has established a strong presence in the private ophthalmic market, with a focus on delivering high-quality, specialized services. It is positioned to benefit from the growing demand for premium eye care in China, driven by rising prevalence of eye diseases, an aging population, and favorable government policies.

Main Points

• Market Position: C-MER holds a 4.7% share in Hong Kong’s RMB3.5bn private ophthalmic market and 5.4% in Guangdong’s RMB686mn market. It is the second-largest private player in Shenzhen.
• Specialized Services: C-MER differentiates itself by offering advanced treatments for complex eye diseases, such as corneal and external eye diseases, glaucoma, vitreoretinal diseases, and oculoplastic and orbital diseases.
• Growth Drivers:
  • Rising prevalence of eye diseases in China, particularly in the elderly and young populations.
  • Aging population in Hong Kong, increasing demand for cataract, glaucoma, and retinal detachments.
  • Technological advancements in ophthalmic surgeries, especially cataract and refractive correction.
  • Favorable government policies supporting private healthcare investment.
• Expansion Plans: C-MER plans to expand its service network with a hospital in Beijing (opened in 4Q17), a Surgery Centre in Mongkok (4Q17), and a fifth Satellite Clinic in Kwun Tong, Hong Kong (1Q18). It also aims to establish or acquire eye hospitals in tier one cities and the Guangdong-Hong Kong-Macau Big Bay Area.
• Financial Outlook:
  • Predicted 28% CAGR in revenue and 44% CAGR in adjusted net profit from 2017 to 2019E.
  • Revenue forecasts: HK$291mn (2017E), HK$439mn (2018E), HK$520mn (2019E).
  • Adjusted net profit forecasts: HK$68mn (2017E), HK$108mn (2018E), HK$133mn (2019E).
• Valuation:
  • Target price (TP) set at HK$5.2, reflecting a 44x 2018E ex-cash PER.
  • This is approximately 15% lower than the industry leader, Aier Eye (300015 CH).
  • The company's stock has quadrupled since its IPO, leading to a Neutral rating.

Key Information

• Pricing Power: Ophthalmology has strong pricing power due to high out-of-pocket expenses.
• Capital Intensity: High capital investment required to support limited ophthalmologist supply.
• Competition: Private ophthalmic market in China is relatively limited in competition compared to public providers.
• Operational Metrics:
  • In Hong Kong, C-MER achieved higher revenue per ophthalmologist (HK$23mn) than its competitors (HK$20-21mn).
  • Revenue growth in Hong Kong was approximately 30% CAGR from 2014-2016, outperforming peers.
• Management and Expertise:
  • The founder, Dr. Lam, is a renowned ophthalmologist and educator, serving as Immediate Past President of the Asia-Pacific Academy of Ophthalmology (APAO) and Editor-in-Chief of the Asia-Pacific Journal of Ophthalmology (APJO).
  • His leadership and brand recognition have contributed to C-MER’s success and patient volume.
• Service Network:
  • In Hong Kong: 1 headquarters with 3 operating theatres and 4 satellite clinics.
  • In Shenzhen: A hospital with 5 operating theatres, 13 normal wards (30 beds), and 1 day-surgery ward.
• Investment Risks:
  • Execution risks related to the opening and ramp-up of new facilities.
  • Competition risks from existing and potential new entrants.
  • Staffing risks due to limited supply of ophthalmologists and the need for competitive remuneration.
  • Reputation risks from non-compliance with regulations.
  • Key man risk due to the founder's significant influence on the company’s operations.

Conclusion

C-MER Eye Care is well-positioned to capitalize on the growing demand for private ophthalmic services in China and Hong Kong, thanks to its specialized services, strong brand recognition, and strategic expansion plans. While it faces certain risks, its differentiated value proposition and operational strengths suggest a sustainable growth trajectory. The company's valuation is set at a discount to industry leaders, reflecting cautious optimism.