Why Good Doctor investors will have to be patient

Ping An Insurance is giving fresh impetus to HK's tech IPO buzz with a $1.1 billion IPO for its online healthcare platform. But, as with some of its tech peers, profits are nowhere in sight.

Ping An Insurance Group, China’s largest privately held insurer, is looking to capitalise on the recent optimism towards so-called new economy stocks as it kicked off a HK$8.1 billion to HK$8.8 billion ($1 billion to $1.1 billion) initial public offering in Hong Kong on Monday for its online healthcare platform.

There is little doubt that the IPO of Ping An Healthcare and Technology will be the spotlight of Hong Kong’s equity capital market for the week ahead. Apart from being Hong Kong’s largest deal so far this year, the company is poised to reignite investor sentiment towards technology stocks following a series of listings from the sector in the fourth quarter last year.

Ping An Healthcare is selling shares to the public in less than six months after ZhongAn Insurance, China Literature, Razer and Yixin completed their flotations on the back of overwhelming demand from investors.

All these new technology stocks were unprofitable at the time of their listings, but public investors were still willing to bet on their potential to bring revolutionary changes to their respective industries.

It is a similar story for Ping An Healthcare.

Operating under the name of Ping An Good Doctor, the online healthcare portal amassed 192.8 million registered users as of the end of last year. Its main rivals We Doctor and Spring Rain Doctor have roughly 150 million users each.

However, it has yet to make a profit, If anything, it appears to have moved further away from that goal with losses expanding to $159 million last year from $51 million in 2015. 

Syndicate analysts are also unconvinced that Ping An Healthcare will move into black in the near term.

According to a banker familiar with the situation, syndicate banks are referencing Ping An Healthcare’s projected valuation on a price-to-sales basis through 2020, which suggests that they don't believe the company will make any significant profit for at least three years.


Many investors, even so, believe Ping An Healthcare is at the forefront of a revolution that is shaking up the traditional healthcare industry as patients increasingly turn to online consultations.

The company is among the beneficiaries of this disruptive trend in China as it has a network of 3,100 hospitals, 1,100 check-up centers, and 7,500 pharmacies that are all connected to patients via its online platform.

Ping An Healthcare is also well prepared for another aspect of the digital healthcare revolution – the growing sales and distribution online of health and wellness products.

As a one-stop healthcare portal, Ping An Healthcare has a competitive edge over other mass e-commerce sites when it comes to selling health products because customers are less likely to get unauthorised or faked goods here.

The company also offers consumer healthcare service packages to individuals and corporations and benefits massively from its parent-group connections since Ping An Insurance's policyholders are naturally directed to Ping An Healthcare for healthcare services.

According to Ping An Healthcare’s IPO prospectus, it generated 48%, 35%, and 13% of its revenue last year from healthcare product sales, consumer healthcare packages and online consultation, respectively.


The company’s massive potential in the digital healthcare sector has earned its Hong Kong IPO one of the most star-studded cornerstone-investor lineups of recent years.

With a total commitment of $550 million, the cornerstone investors include BlackRock ($125 million), Government of Singapore Investment Corporation ($100 million), Canada Pension Plan Investment Board ($100 million), and Capital Group ($75 million). Malaysia’s sovereign wealth fund Khazanah Nasional, Thailand’s CP Group and Swiss Re will also invest $50 million each.

The company counts Softbank as an existing shareholder. The Japanese tech giant invested $400 million in a private funding round in December last year.

Ping An Healthcare’s 160 million-share deal is being marketed at HK$50.8 to HK$54.8 per share, giving it an implied valuation of $6.9 billion to $7.4 billion on a pre-greenshoe basis.

Such a valuation corresponds to about 8.69 to 9.38 times its estimated 2019 revenue, or 5.6 to 6.04 times on 2020 figures, according to a syndicate banker.

The IPO is conducted under an accelerated timetable involving four days of bookbuilding, which is relatively short for a billion-dollar transaction. The company’s listing date is set for May 4.

Citigroup and JP Morgan are joint sponsors of Ping An Healhtcare’s IPO. UBS and Ping An of China Securities are joint global coordinators. CCB International, CICC, CLSA, CMB International, China Merchant Securities and HSBC are joint bookrunners.

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