My Thoughts on C-MER EYE and XIRR Update

 

Please click and read this disclaimer if you wish to continue with the contents below.

I initiated a position in C-MER EYE(HK:3309) today, after rebalancing my top 3 counters. C-MER is one of the leading ophthalmology service providers in Hong Kong and China. Their service networks are primary based in tier 1 cities like HK, Guangzhou, Shanghai, Beijing and Shenzhen. Founder is a world renown ophthalmologist and owns 60% of the total issued shares.

Its IPO in 2018 was extremely hyped up because Tencent's boss, Pony Ma, was one of the cornerstone. It was 1,568 times oversubscribed and share price rose nearly 5.9x to peak at $19.90. Since then it has languished for two years and is currently trading at around $6. C-MER's China HQ is in Shenzhen, Pony Ma must have used its service before. The company is not as large as Aier(SZ:300015) but its technology is more advanced compared to Aier.

Healthcare is a good track in China especially specialized practice like IVF or Ophthalmology because the barrier to entry is high and the track is quite certain. Those who have not read about my views on Jinxin Fertility can click here. I sold JXR at a 53% gain, but its price has since continued to rise. China's medical service market is huge and growing rapidly. The scale of the country's medical expenses has increased from 1.5 trillion yuan in 2008 to 6.6 trillion yuan in 2019, with a compound annual growth rate of 14.7%. Government, social and personal health expenditures also achieved substantial growth during this period, with compound annual growth rates of 15.7%, 17.72% and 11.21% respectively. 

Aier, its competitor, is the largest ophthalmology service provider in China and it has reaped the benefit of the China track due to its scale and expansive nature. Below is the chart of Aier:

Its share price has risen more than 9x in 3 years. Price to sale ratio is now 34x and Price to book is now 34x. With a market cap of 375 billion.

C-MER on the other hand, has just established its bases in tier 1 cities in China and is ready for rapid expansion. If we use pre covid numbers to value, its 3 years revenue CAGR is approx. 23%. Its eps has great flexibility, but growth should still be its main priority. Price to sale of 12.7x and a net cash of 400mil HKD. Its market cap is only 7.3 billion. 51x smaller than Aier. With its bases in key cities already established, scaling rapidly from each one will be easy.

The founder, Dr Denise Lam was recently interviewed by Mediazone HK(video below). He talked about C-MER’s  remote diagnosis technology, telemedicine license in Shenzhen, new diagnosis machineries and the company's expansion plan ahead.

One negative is their recent purchase of a dentistry practice, its a small acquisition but it gives shareholders a feeling that the company is not focused on ophthalmology. It will be very hard to compete with the leaders if they start to diversify when they are still small. The company insisted though that their core will always be ophthalmology.

Full disclosure, I have vested interest in this stock and I'm currently up 5%

Snap shot of my portfolio performance as of today: Total profit for 2021: S$110,828.06. Mainly due to Chanjet(+12%) and Weimob(+10) today. Chanjet, XD and Weimob have all given me more than 200% profit so far.



No comments :

Post a Comment