Chinese VC-backed hospital chain files for Hong Kong IPO
Pengai Hospital Management Group, a Chinese cosmetic surgery chain backed by CMHJ Partners, IDG Capital and TDR Capital, has filed for a Hong Kong IPO.
The size and pricing of the IPO were not announced in the company's regulatory filing.
IDG holds a 10.60% stake in Pengai, with CMHJ and TDR each holding a 7.95% stake. The company's founders, Dr. Zhou Pengwu and Dr. Ding Wenting, control 36.94% and 35.49% of the company, respectively.
Pengai, founded in 1997 as the Shenzen Pengcheng General Hospital, now operates 14 treatment centers in 11 cities in China. Its main sources of revenue are non-surgical and surgical aesthetic treatments - such as cosmetic surgery and laser hair removal - along with general healthcare services, including internal medicine and gynecological-obstetrics services.
IDG, CMHJ and TDR participated in a Series A round of funding in 2012. IDG paid $3.2 million for its stake, with CMHJ and TDR each contributing $2.4 million for theirs. Later in 2012 the VC firms purchased additional Series A shares, bringing the total investment to $6 million for IDG and $4.5 million each for CMHJ and TDR.
Pengai reported RMB542 million ($86.5 million) in 2014, up from RMB424 million in 2013 and RMB352 million ($56.2 million) in 2012. Net profit came to RMB33.5 million in 2012, but the company swung into the red for 2013 and 2014, with losses of RMB255.6 million and RMB214.4 million. This was attributed to a fair value loss on preferred shares as a result of increasing the equity value of the company.
China's cosmetic medical services industry has grown rapidly over the last four years, fuelled by rising levels of disposable income, growing social acceptance of aesthetic treatments among Chinese consumers and a rising average age in the Chinese population.
According to a report by Frost & Sullivan, the total revenue from cosmetic medical procedures - both surgical and nonsurgical - in China rose from $2.79 billion in 2009 to $4.75 billion in 2013. By 2013 revenue, Pengai represented 5.1% of this market among multi-site centers and 1.2% among all operators.
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