Portfolio Review for 15th June 2021

 

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For my previous portfolio review click here

YTD(2021) I have made a total profit of S$62,311.76 from my equity investments(predominantly in HK) with an XIRR of 55.99%(XIRR is annualized). From my 6 years of tracking, I have made a total of S$161,954.42 from this portfolio alone.


There is a gradual improvement in my performance this month as 10 years treasury rate stabilizes and the tech selloff starts to consolidate. 

Portfolio composition(2 index etfs and 29 stocks):

Transactions:

Added more China Youzan(HK:8083) to 4.43%

Added more JD Health(HK:6618) to 3.31%

Commentary:

C-MER EYE(HK:3309): saw a 28.45% price increase today. The company did an update and indicates that it will introduce the "Aier" model and enter high growth. According to the recent roadshow report, C-MER has announced its expansion goals in the next five years. It will adopt self-built projects and mergers and acquisitions to expand the ophthalmology department in the short term. The number of hospitals has doubled to 20, and the number of eye hospitals will be increased to no less than 50 by 2025, which is equivalent to a four-fold increase in scale in the next five years. According to the report, C-MER will use in vitro cultivation in cooperation with strategic investors to rapidly expand.

The current hospitals and clinics of C-MER Eye Clinic are mainly concentrated in Hong Kong and the Mainland. There are 3 day surgery centers and 8 satellite clinics in Hong Kong (8% market share, Hong Kong first), 7 eye hospitals and 3 satellite eye clinics in the Mainland , and Guangzhou Eye Hospital will be put into operation in the second half of this year.

At present, the annual revenue of more than 10 hospitals and clinics is close to 600 million yuan (the newly opened hospitals in the past two years are far from mature), compared to nearly 12 billion yuan (149 domestic hospitals, 93 outpatient departments, external hospitals and clinics), the scale is indeed very small. C-MER announced that it will expand to 50 eye hospitals in the next five years means the market is full of expectations for its growth. The biggest difference between Aier and C-MER Ophthalmology is the expansion model. Aier expands outside the body, and then acquires a listed company after it is matured by external forces. C-MER is cultivated in vivo, which is less efficient. The hospital report before maturity is also ugly.  For ophthalmology institutions to solve the core chain expansion problem, I think the most important thing is the mechanism of talent management and training. 

Ophthalmology service is an industry that relies heavily on doctors + equipment, especially the training of experienced ophthalmologists. Aier has explored a more mature incentive and talent training mechanism through more than ten years of expansion experience. If C-MER wants to achieve the goal of scaling up to 50 companies in 5 years, I think it is difficult to rely solely on mergers and acquisitions or endogenous cultivation. 

Judging from the current valuation, at the close of the market on June 15, the PS valuations of Aier Ophthalmology and C-MER Ophthalmology were 25.7X and 14.4X respectively. There is still a big gap between the two. Aier’s high valuation comes from about 300 companies being scaled up outside its core. C-MER's long-term growth potential remains to be seen. In the short term, C-MER’s revenue in the next two years can take another step forward, because several hospitals in the mainland are expected to gradually mature and turn profitable. If revenue of 800 million is achieved in 2021, the corresponding PS will be about 11X . If the market is optimistic, give it 15-20X. In between, the market value may reach 14-19 billion Hong Kong dollars. If you look at it this way, the current 10 billion Hong Kong dollar value of C-MER is not too high.

I wrote about C-MER in Feb 2021 can read here. It is 51x smaller in terms of market cap compared to its competitor Aier Ophthalmology. Seems like the company is getting ready for rapid expansion into China to become a true competitor. Specialize healthcare track in China is huge and growing rapidly. Will continue to track its financials closely.

IQIYI(US:IQ): saw a decent rise of 7.02% last night after bottoming. The total sales of China's online long video market should not be lower than that of the United States. The reason why the market is not good is that the vicious competition of long form video is serious in China and the superimposed copyright protection is not effective. These two shortcomings will be gradually resolved in the next few years, and China’s Netflix will appear in the long video field. It is difficult to say which one it will be.

But if we track the MAU, it is clear that Youku (Alibaba) gap is widening from the two leaders IQIYI and Tencent Video. IQIYI is currently leading in terms of total MAU. 

Another interesting news is their push into the movie business. iQiyi will be announcing a line-up of 33 films in the next three years. The platform plans to release 20 movies a year by 2023, and will have a staggered online pricing plan.

As we are more and more comfortable with DTC streaming and as TV gets cheaper and better, now is the time to disrupt the cinemas(middle man) and go direct to consumer. This movie push should increase IQIYI's top line in the short term which is much needed. 

IQIYI's valuation is only 5.8billion usd with a 1.3x price to sale. This has got to be the cheapest DTC streaming service on the market that has a global presence. Netflix has a market cap of 222billion usd which is 38x more expensive and a 9x price to sales.

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