Traditional Therapy Clinics Ltd is an Australian Company with business operations focused on healthcare in the Peoples Republic of China.
The past decade has seen Australia’s equity capital market host a consistent trickle of floats with principal operations in mainland China. Industry sectors represented by these listings has been fairly diversified – ranging from natural resources, media, advertising, textile trading and manufacturing ventures. The entire spread of corporate life cycle has also been represented, with these ventures ranging from the start up phase to established operations generating profits.
Whilst scale of the market opportunity in China can be alluring, as a rule of thumb, actual shareholder returns in these ventures has to date been incredibly challenged. Independent of sentiment toward mainland share indices, returns to investors in ASX listed ‘China’ ventures have been elusive – whether your measure be capital gain or dividend. Amid a fresh deterioration in confidence toward the mainland economy – can the listing of Traditional Therapy Clinics Ltd provide some much needed stress relief?
The healthcare services company hosts a network of over 300 traditional therapeutic health and wellness clinics operating under the ‘Fuqiao’ brand in mainland China. Established in 1998, the Company currently provides employment for 10,000 therapists, has 299 franchised clinics in the network and 11 Company owned. Males account for 70 per cent of its patronage, although the Company reports that its female customer base is on the rise.
On track to record its third consecutive year of increasing revenue and profit, proceeds from Traditional Therapy Clinics IPO is intended to provide expansion capital. Incentive for participants is the Company’s potential to extend recent profit growth and its forecast to pay a dividend equal to 50 per cent of net profit for CY15. Traditional Therapy Clinics aims to expand its portfolio of Company owned clinics through acquisition of franchised outlets.
With successful execution of the strategy bearing potential to be value accretive, primary risks surround the Chinese regulatory climate, and challenging precedents set by other ASX listings focused on China. Traditional Therapy Clinics dividend forecast sets a positive benchmark amongst its peers, and its valuation appears undemanding, however the risks set by other ASX listings with principal business operations in China are difficult to ignore.
Author: Tim Morris
Sep 01, 2015
Having studied Commerce and Science at the University of New South Wales, Tim began his career in an analytical capacity with Wise-owl. Tim has conducted over 500 corporate valuations and appraisals, specialising in pre revenue assets and emerging markets. For the last five years, his Equity Capital Market insights have been featured as part of a weekly column in The Australian and regularly features on Sky News, CNBC, ABC and Bloomberg TV.