HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Capital Markets

Dental Doctor Medical Holding Group / Equity Capital Markets

Dental Doctor Medical Holding Group (DDM HK)

<ul>
<li>Dental Doctor has not established core competitiveness and high moat, and has to invest more on marketing and promotion to attract customers and drive growth.</li>
<li>The lack of dentists, weak talent and training system as well as high dentist turnover rate would be big concerns for the Company’s long term development, especially for nationwide expansion.</li>
<li>This industry has not yet entered the profit mode. Most of chain dental services providers are still in the stage of cash-burning expansion. So, we are conservative about the Company’s outlook.</li>
</ul>


Dental Doctor has not established core competitiveness and high moat, and has to invest more on marketing and promotion to attract customers and drive growth.
The lack of dentists, weak talent and training system as well as high dentist turnover rate would be big concerns for the Company’s long term development, especially for nationwide expansion.
This industry has not yet entered the profit mode. Most of chain dental services providers are still in the stage of cash-burning expansion. So, we are conservative about the Company’s outlook.


Pre-IPO Dental Doctor Medical Holding Group - An Uncertain Outlook and Concerns About Profitability

Equity Bottom-Up

<ul>
<li>Arrial's positioning at high-end private dental chain indicates limited growth space. The large investment in dental professionals drags down overall margins but fails to generate good word-of-mouth and expected returns.</li>
<li>Public hospitals with NRDL reimbursement and private dental chains with high cost performance would put more pressure on Arrail. Increasing marketing/promotion expenses cannot turn things around but further reduce margins.</li>
<li>Overall, the high-end strategy cannot bring high-end returns. We are not optimistic about Arrail's prospects and profitability. The Company may even keep losing money and hard to turn profitable.</li>
</ul>


Arrial's positioning at high-end private dental chain indicates limited growth space. The large investment in dental professionals drags down overall margins but fails to generate good word-of-mouth and expected returns.
Public hospitals with NRDL reimbursement and private dental chains with high cost performance would put more pressure on Arrail. Increasing marketing/promotion expenses cannot turn things around but further reduce margins.
Overall, the high-end strategy cannot bring high-end returns. We are not optimistic about Arrail's prospects and profitability. The Company may even keep losing money and hard to turn profitable.


Arrail Group (6639.HK) - The Development Strategy Cannot Generate High Returns

<ul>
<li>Driven by the development mode of "organic growth + strategic acquisitions + cooperation with hospital partners", <a href="https://www.smartkarma.com/entities/hygeia-healthcare-group" target="_blank" data-smartkarma-citation="entities:28875:1" rel="noopener">Hygeia Healthcare Group (6078 HK)</a> could rapidly expand nationwide, with solid business logic. </li>
<li>Hygeia's delicacy management and the strength in operation help the Company to break the limits of the expansion of private hospitals, helping shorten the time it takes to break even.</li>
<li>However, the high uncertainties on policy and State’s attitude towards private hospitals cast shadow on Hygeia's long-term prospects, but investors could still trade this stock in short term.</li>
</ul>


Driven by the development mode of "organic growth + strategic acquisitions + cooperation with hospital partners", Hygeia Healthcare Group (6078 HK) could rapidly expand nationwide, with solid business logic. 
Hygeia's delicacy management and the strength in operation help the Company to break the limits of the expansion of private hospitals, helping shorten the time it takes to break even.
However, the high uncertainties on policy and State’s attitude towards private hospitals cast shadow on Hygeia's long-term prospects, but investors could still trade this stock in short term.


Hygeia Healthcare Group (6078.HK) 2021 Results - Solid Business Logic Comes with Policy Risk

Asia Pac ECM and Index Rebal, Shenton Research

Ke Yan, CFA, FRM

Asia Pac ECM and Index Rebal

Asia Pac IPO & Placement Research, China Biotech

DZT Research

DZT Research is an independent Asia Pacific equity specialist. Our quantitative research covers index rebalancing flows, alongside exchange data analytics accross Asia Pacific. On the equity capital markets side, we focus on Asia Pacific ECM, especially biotech and TMT. Our lead analyst is frequently cited by international media.

<ul>
<li>Arrail Group raised HKD 589.9 million (USD 75m) from its global offering and will list on the Hong Kong Stock Exchange on Tuesday, Mar 22nd.</li>
<li>In our previous notes, we looked at the company's background, its operation, its financials, and its expansion plan, compared its key metrics with peers and provided thoughts on valuation.</li>
<li>In this note, we look at the updates since our last note and prior to debut.</li>
</ul>


Arrail Group raised HKD 589.9 million (USD 75m) from its global offering and will list on the Hong Kong Stock Exchange on Tuesday, Mar 22nd.
In our previous notes, we looked at the company's background, its operation, its financials, and its expansion plan, compared its key metrics with peers and provided thoughts on valuation.
In this note, we look at the updates since our last note and prior to debut.


Arrail Group (瑞尔集团) IPO Trading: Weak Demand, Rich Valuation

<ul>
<li>Policy risk is the biggest uncertainty for domestic medical service sector, without any overseas revenue to “hedge” such risk.</li>
<li>The market places great hope on Topchoice to become a cross-regional enterprise with high growth sustainability. Without a reliable and replicable expansion model, the high valuation is not logical.</li>
<li>Therefore, our view is that the Company's investment logic has been shaken. <a href="https://www.smartkarma.com/entities/topchoice-medical-corporation" target="_blank" data-smartkarma-citation="entities:1102:1" rel="noopener">Topchoice Medical (600763 CH)</a> could be a short-term trade, but not long-term hold.</li>
</ul>


Policy risk is the biggest uncertainty for domestic medical service sector, without any overseas revenue to “hedge” such risk.
The market places great hope on Topchoice to become a cross-regional enterprise with high growth sustainability. Without a reliable and replicable expansion model, the high valuation is not logical.
Therefore, our view is that the Company's investment logic has been shaken. Topchoice Medical (600763 CH) could be a short-term trade, but not long-term hold.


Topchoice Medical (600763.CH) - The Logic Changes

China

Topchoice Medical Investment Corporation provides dental and oral health care services.

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Topchoice Medical (600763 CH)

Pre-IPO Dental Doctor Medical Holding Group - An Uncertain Outlook and Concerns About Profitability

Dental Doctor hasn't established core competitiveness.The lack of dentists/low profitability hinder expansion.As a reliable profit model hasn't...

Xinyao (Criss) Wang

Arrail Group (6639.HK) - The Development Strategy Cannot Generate High Returns

Arrail's development strategy cannot generate high returns, with limited growth space.High labor cost and marketing/promotion expense drag down...

Xinyao (Criss) Wang

Hygeia Healthcare Group (6078.HK) 2021 Results - Solid Business Logic Comes with Policy Risk

The growth prospects and endogenous growth logic are better than Topchoice. The overall development pace is also not as radical as Aier. However,...

Xinyao (Criss) Wang

Arrail Group (瑞尔集团) IPO Trading: Weak Demand, Rich Valuation

We look at the updates of Arrail Group IPO since our last note and prior to debut. The company is a leading premium dental chain in China.

Ke Yan, CFA, FRM

Topchoice Medical (600763.CH) - The Logic Changes

We analyzed the expansion, profit model and logic of Topchoice. Under centralized procurement, DRGs or other policies, we have doubts on its...

Xinyao (Criss) Wang

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