20160724-东英亚洲证券-联合医务-00722.HK-Leading_corporate_healthcare_solution_platform_provider_38页_3mb

Equity Research Summary: Healthcare/China - UMP (722 HK)

Core Content

UMP is a leading corporate healthcare solutions provider in Hong Kong, with a market share of 13.1% in 2014. It has over 20 years of experience in the Hong Kong market and is expanding its services to Beijing and Shanghai. The report initiates a BUY rating with a target price of HK$2.02, based on a 25x FY17E PE.

Key Data

• Close Price: HK$1.27
• Target Price: HK$2.02 (+59%)
• Market Cap: HK$934.72 million
• Issue Share: 736.00 million
• 3M Avg Daily Vol.: 1.66 million
• 12 Months High: HK$2.06
• 12 Months Low: HK$0.98
• Major Shareholder: Director Sun Yiu Kowng (33.12%)

Main Points

1. Leading Player in Hong Kong Corporate Healthcare Market

• UMP is the second-largest corporate healthcare solutions provider in Hong Kong with a 13.1% market share.
• The Hong Kong corporate healthcare solutions market is expected to grow at a 12.7% CAGR from HK$2.7bn in 2014 to HK$4.9bn in 2019E.
• UMP is forecasted to maintain its market position with a 13.0% CAGR in sales from FY15 to FY18E.
• In FY1H16, UMP had ~806,000 plan members and 9,553 healthcare plans, contributing 66% of its sales with an ASP of HK$241 and a 10.6% operating margin.

2. Business Model

• Corporate Healthcare Solutions: 66% of sales, 10.6% operating margin. UMP provides a platform between insurance companies and corporations, charging benefit plan fees.
• Clinical Healthcare Services: 34% of sales, 13.4% operating margin. UMP operates 42 self-owned clinics, focusing on self-paid patients.

3. Expansion to Beijing and Shanghai

• Beijing: UMP will set up a 50-50 JV with Phoenix Healthcare Group (1515 HK). Three integrated medical centers are planned to start in 2H16, with 10 more expected in 3 years.
• Shanghai: UMP plans to open a medical center in the CBD area in Jul/Aug 2016, aiming for no less than 10 centers in 3-5 years.
• Market Potential: The potential primary healthcare outpatient visits in Beijing and Shanghai are expected to be 103mn and 123mn by 2018E, respectively, representing 3.5 times the size of the Hong Kong market.

4. Financial Forecast

• Revenue (HK$ mn): FY14A: 353.0, FY15A: 401.0, FY16E: 453.4, FY17E: 531.0, FY18E: 613.1
• Net Profit (HK$ mn): FY14A: 41.5, FY15A: 41.4, FY16E: 12.9, FY17E: 63.3, FY18E: 87.1
• DPS (HK$): FY16E: 0.002, FY17E: 0.008
• Yield (%): FY16E: 0.13%, FY17E: 0.64%
• P/E (x): FY17E: 15.7, FY18E: 11.4
• P/B (x): FY17E: 2.2, FY18E: 1.8

5. Near-Term Catalysts

• Potential launch of dividend policy in FY16 with a 10% payout ratio.
• Successful ramp up of China business, expected to become profitable in FY18E.

6. Investment Risks

• Delay in new clinic setup.
• Slow ramp up of new clinics.

Key Information

• UMP's strategy involves replicating its successful Hong Kong model in Beijing and Shanghai.
• The expansion to Beijing and Shanghai is driven by the underdeveloped insurance market and strong policy support.
• The report highlights the potential of the primary healthcare market in China, which is expected to grow significantly.
• The low insurance density and penetration in China indicate a strong growth opportunity for corporate healthcare services.
• UMP is well-positioned to benefit from the expansion due to its strategic partnerships and experience in the corporate healthcare sector.

Summary

UMP is a leading corporate healthcare solutions provider in Hong Kong, with a clear expansion strategy to Beijing and Shanghai. The company's dual revenue model (corporate healthcare solutions and clinical services) supports its growth and profitability. With a target price of HK$2.02 and a BUY rating, UMP is seen as a promising investment due to its potential to capture a significant share of the growing primary healthcare market in China. The report also highlights the potential for a dividend policy launch and the importance of its strategic partnerships in facilitating expansion.