Quality-first, Business-perspective, Long-term, Urbem (HK) Limited

Urbem Capital

Quality-first, Business-perspective, Long-term

Quality-first, Business-perspective Strategy

Urbem (HK) Limited

Equity Bottom-Up

<ul>
<li>Beauty services now exceed 90% of revenue, validating the service-led thesis while recent growth suggests the model is still economically relevant.</li>
<li>Our concerns around moat, disclosure and management remain partly valid, but the accounting deterioration and value-trap outcomes we feared never materialized.</li>
<li>The biggest lesson is valuation: Water Oasis did not need to become exceptional; it only needed to remain durable enough at a deeply discounted price.</li>
</ul>


Beauty services now exceed 90% of revenue, validating the service-led thesis while recent growth suggests the model is still economically relevant.
Our concerns around moat, disclosure and management remain partly valid, but the accounting deterioration and value-trap outcomes we feared never materialized.
The biggest lesson is valuation: Water Oasis did not need to become exceptional; it only needed to remain durable enough at a deeply discounted price.


Water Oasis: Six Years Later, the Value Trap Never Arrived

Equity, Bottom-up Analyst, Investics Research

Sameer Taneja

Equity, Bottom-up Analyst

Investics Research

It is important to note that the information provided by Investics Research is based on publicly available data and own knowledge, which has been gathered and analyzed from a variety of sources. While every effort has been made to ensure the accuracy and completeness of the information provided, it is not guaranteed to be free from errors or omissions. All forecasts and estimates are based on information that has been obtained from public sources that are considered to be reliable. The sources include but are not limited to, company announcements, exchange filings, presentations, etc. Investics does not guarantee the accuracy and completeness of the forecasts, estimates, and/or other information.

Equity Bottom-up Research

<ul>
<li>We follow up on our insight <a href="https://www.smartkarma.com/insights/water-oasis-1161-hk-getting-silly-cash-now-118-of-market-capitalization" target="_blank" data-smartkarma-citation="insights:215712" rel="noopener">Water Oasis (1161 HK) - Getting Silly, Cash Now 118% of Market Capitalization</a>, with the company now reporting a positive profit alert for H1FY26.</li>
<li>Tailwinds from a pickup in retail demand bode well for the company, indicating a 23-30% YoY increase in H1FY26 profits (68 Mn-72 Mn HKD). </li>
<li>Annualizing the lower end of guidance (profits are not seasonal) implies the stock trades at 5x PE with 10% dividend yield (on a lower payout ratio of 50%).</li>
</ul>


We follow up on our insight Water Oasis (1161 HK) - Getting Silly, Cash Now 118% of Market Capitalization, with the company now reporting a positive profit alert for H1FY26.
Tailwinds from a pickup in retail demand bode well for the company, indicating a 23-30% YoY increase in H1FY26 profits (68 Mn-72 Mn HKD). 
Annualizing the lower end of guidance (profits are not seasonal) implies the stock trades at 5x PE with 10% dividend yield (on a lower payout ratio of 50%).


Water Oasis (1161 HK): Positive Profit Alert, Tailwind From HK Retail Rebound

Plover Bay Technologies / Equity Bottom-Up

<ul>
<li>The screen isolates eight Hong Kong-listed companies with a five-year average ROCE above 15% (median 33.0%), spanning exchanges, medical aesthetics, toys, apparel, and networking hardware.</li>
<li>Capital efficiency converts into cash: all eight have paid dividends every year since FY20, with a median trailing yield of 7.7% and cumulative payouts near half the average share price.</li>
<li>Valuations remain undemanding: six of eight trades trade below 11x earnings and 6x EV/EBITDA, leaving Taste Gourmet, JNBY, and Dream International the best risk-reward.</li>
</ul>


The screen isolates eight Hong Kong-listed companies with a five-year average ROCE above 15% (median 33.0%), spanning exchanges, medical aesthetics, toys, apparel, and networking hardware.
Capital efficiency converts into cash: all eight have paid dividends every year since FY20, with a median trailing yield of 7.7% and cumulative payouts near half the average share price.
Valuations remain undemanding: six of eight trades trade below 11x earnings and 6x EV/EBITDA, leaving Taste Gourmet, JNBY, and Dream International the best risk-reward.


HK High ROCE - Compounders Hiding in Plain Sight

Perfect Medical Health Management / Equity Bottom-Up

Perfect Medical Health Management (1830 HK)

<ul>
<li>Our 2020 thesis correctly identified Perfect Medical’s cash generation and management discipline, but underestimated how narrow and execution-dependent its moat was.</li>
<li>The full financial history shows resilience rather than compounding: overseas expansion disappointed, margins compressed sharply, and competitive pressure remained persistent.</li>
<li>At roughly 9x FY03/2026 earnings with an 11% trailing dividend yield, the stock is interesting again - but the thesis is now stabilization and cash return.</li>
</ul>


Our 2020 thesis correctly identified Perfect Medical’s cash generation and management discipline, but underestimated how narrow and execution-dependent its moat was.
The full financial history shows resilience rather than compounding: overseas expansion disappointed, margins compressed sharply, and competitive pressure remained persistent.
At roughly 9x FY03/2026 earnings with an 11% trailing dividend yield, the stock is interesting again - but the thesis is now stabilization and cash return.


Perfect Medical Revisited: What Worked, What Did Not, and What 9x Earnings Means Today

<ul>
<li>If <a href="https://www.smartkarma.com/entities/perfect-medical-health-management" target="_blank" data-smartkarma-citation="entities:3639:1" rel="noopener">Perfect Medical Health (1830 HK)</a> replicates in H1FY26 earnings, a 15 HKD cent dividend implies a 12.5% dividend yield on the current share price (100% payout ratio). </li>
<li>The semi‑annual results suggest modest improvement in retail sales, though management of most firms (except Flameglow 8603 HK) remain guarded in their outlooks. </li>
<li>In order of preference, currently <a href="https://www.smartkarma.com/entities/water-oasis-group-ltd" target="_blank" data-smartkarma-citation="entities:17348:1" rel="noopener">Water Oasis (1161 HK)</a> seems the safest bet, followed by <a href="https://www.smartkarma.com/entities/perfect-medical-health-management" target="_blank" data-smartkarma-citation="entities:3639:1" rel="noopener">Perfect Medical Health (1830 HK)</a>. While Flameglow's growth is good, margins are a question mark.</li>
</ul>


If Perfect Medical Health (1830 HK) replicates in H1FY26 earnings, a 15 HKD cent dividend implies a 12.5% dividend yield on the current share price (100% payout ratio). 
The semi‑annual results suggest modest improvement in retail sales, though management of most firms (except Flameglow 8603 HK) remain guarded in their outlooks. 
In order of preference, currently Water Oasis (1161 HK) seems the safest bet, followed by Perfect Medical Health (1830 HK). While Flameglow's growth is good, margins are a question mark.


Medical Beauty Plays in Hong Kong: Perfect/Water Oasis and Flameglow: A Better Retail Environment?

Hong Kong

Water Oasis Group Limited is an investment holding company that provides beauty services and retails skincare and beauty products. Its services include beauty centers, spas, medical beauty centers, and dental services, while its product segment offers skincare brands such as h2o+, Erno Laszlo, and Glycel. The company was founded in 1998 and is headquartered in Hong Kong.

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Water Oasis Group (1161 HK)

Water Oasis: Six Years Later, the Value Trap Never Arrived

Our 2020 concerns were mostly valid, but Water Oasis shows that an imperfect business can still reward owners when durability and valuation...

Urbem Capital

Water Oasis (1161 HK): Positive Profit Alert, Tailwind From HK Retail Rebound

With the recent profit alert from Water Oasis for H1FY26, the stock trades at a 5x PE ratio with a 10% dividend yield (on a 50% payout). We will...

Sameer Taneja

HK High ROCE - Compounders Hiding in Plain Sight

Eight HK-listed names with a 33% median ROCE, annual dividends since FY20, and a 9.4x median P/E. Median total return: 214% since 2020. Best value:...

Sameer Taneja

Perfect Medical Revisited: What Worked, What Did Not, and What 9x Earnings Means Today

Six years on, Perfect Medical looks less like the compounder we once envisioned and more like a resilient cash-return story whose narrow moat is...

Urbem Capital

Medical Beauty Plays in Hong Kong: Perfect/Water Oasis and Flameglow: A Better Retail Environment?

We contrast all the beauty plays in HK, i.e., Water Oasis, Perfect Medical, Flameglow, and EC healthcare. We provide commentary on their recent...

Sameer Taneja

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