Sectors:

Air & Automobiles (Zhang Jing),

TMT, Semiconductors, Consumer, Healthcare (Eric Li)

TMT, Food (Elvis Kwok)

TMT, Semiconductors, Consumer, Healthcare (Eric Li)

This month I released reports of Perfect Medical (1830.HK) & EC Healthcare (2138.HK).

Perfect Medical Health Management (“Perfect Medical”) is a comprehensive medical beauty and medical healthcare service provider, through integrating and developing its “Medical + Beauty” operational model, offering customers safe and effective medical services. Perfect Medical has a presence throughout Hong Kong, China, Australia, Singapore and Macau. The company principally engages in the provision of providing one-stop “Medical + Beauty” services and provides a full range of services, including “Medical (Pain Management)”, “hair growth treatment”, “Gynaecological medical service”, “men's beauty and weight management”, “Medical Beauty services” and etc.In 1HFY2023 (for the six months ended 30 September 2022), Perfect Medical's revenue decreased by 16.6% to HK$668.3mn, impacted by Covid-19 pandemic. EBITDA decreased by 25.5% to HK$229.7mn, representing the EBITDA margin of 34.4% for the period (1HFY2022: 38.4%). Profit attributable to equity holders was HK$150.7mn, dropped 30.4% YoY, representing a net profit margin of 22.5% for the period, down 4.5 percentage points YoY. Basic earnings per share was HK12.1 cents. Interim dividend of HK13.0 cents, the dividend payout ratio is 107.4%.

For the period under review, with the 5th wave of Pandemic had lingering effect in Hong Kong, together with the adverse market sentiment due to the global and local economic downturn, the overall consumption sentiment had deteriorated. The company's performance has been impacted by the slower consumption trend in Hong Kong and the return of the Pandemic in China. The softening of the company's revenue had led to a drop in net profit during the period; and mainly impacted by the Pandemic, the company had business suspension of 20 days in Hong Kong, 39 days in Macau, as well as business disruption for an average of 14 days, 23 days, 63 days and 19 days across Guangzhou, Shenzhen, Shanghai and Beijing respectively. the employee benefit expenses decreased by 3.8% to HK$230.6mn. The marketing expenses decreased substantially by 26.1% to HK$77.7mn. The rental lease related expenses increased by 11.0% at HK$87.1mn, in line with the expansion in service areas. The operating profit decreased by 31.9% and reached HK$187.0mn, representing an operating profit margin of 28.0%, down 6.3 percentage points YoY..

In China, the wide-spreading pandemic in April to May 2022 and the resurgence in several provinces and cities in September 2022 has severely disrupted the economic development in all aspects. Periodic lockdown in selected areas and the advocacy of “zero-Covid-19” policy have substantially reduced the traffic flow in shopping malls, which directly impacted on the customers visit and consumption. The company's domestic business will inevitably be affected. However, as for the aesthetic medical industry, the non-invasive aesthetic services continued to receive strong demand in China. With the benefit of a much lower penetration rate relative to other international countries, a relatively higher repeat purchase rate nature and the improving living standard in China, the high-end aesthetic medical industry is expected to grow healthily. Currently, Perfect Medical focuses on the first tier cities including Beijing, Shanghai, Guangzhou and Shenzhen, and opened three shops in strategic locations in Hong Kong, Guangzhou and Beijing during the period to strengthen the presence. In fact, as China and Hong Kong gradually resume normal life and resume normal customs clearance, and the potential influx of tourists into Hong Kong in coming years, which is expected to be conducive to the recovery of the company's business.

TMT, Food (Elvis Kwok)

This month I released one report, Bilibili (9626.HK). Bilibili (9626.HK) is an online entertainment platform for young generations. Its main businesses include mobile games, value-added services, advertising, e-commerce and others. The main income of mobile games is the company's distribution of mobile games for third-party game developers on its platform. Users can download and play with Bilibili accounts for free, while users purchase virtual items in the games to get a better gaming experience, allowing the company to earn revenue from it. The main income of value-added services is the subscription fee from premium membership. Premium members can obtain exclusive rights to original or licensed content, the sale of virtual gifts in live channels and the sale of paid content and virtual items on the company's video, audio and comic platforms. Advertising revenue mainly comes from various forms of advertising services, including advertisements that appear on the launch page or top of mobile applications, banner brand advertisements at the top of website homepages, and performance advertisements that appear mainly in the form of organic feeds next to online video feeds. E-commerce and other major revenues come from the company's online sales of ACG (animation, comics and video games) related products and offline performance and event ticket sales.

A review of Q3 2022 Results

Bilibili (9626.HK) has announced the Q3 report ended September 30, 2022. The company's revenue amounted to RMB 5.8 billion, increasing 11.1% YoY. Cost of revenue amounted to RMB 4.7 billion, increasing 13.1% YoY. Gross profit amounted to RMB 1.1 billion, increasing 3.5% YoY. Gross profit margin was 18.2%, decreasing 1.4 percentage point YoY. Operating loss was RMB 1.9 billion, loss slightly narrowed by 1.6% YoY. The loss for the period was RMB 1.7 billion, loss narrowed by 36.1% YoY. Adjusted net loss amounted to RMB 1.8 billion, loss expanded by 8.8% YoY.

Business features

The company is a comprehensive video community that provides a large amount of rich content to meet the diverse interests of young people, and users and content creators can interact with each other. The content categories include life, games, entertainment, animation, knowledge and many other fields. The company also supports a wide range of video content consumption scenarios, centered on professional user-generated video (PUGV), supplemented by live broadcast, professional organization-generated video (OGV), etc. In term of user data and characteristics, the users of the platform are mainly people of the Z+ generation, which refers to people born in the middle and late 1990s to the early 2010s. According to the iResearch report, among the MAUs of the platform in 2020, users aged 35 and below accounted for more than 86%.

Mobile games

As of December 31, 2021, the company has operated 59 exclusive mobile games and hundreds of jointly operated mobile games. Currently, the company's top three exclusive mobile games are Fate/Grand Order (FGO), Guardian Tales and Azur Lane.

Positive factors

The company deeply cultivates ACG content to grasp the market trend / Re-approval of imported game licenses are good for the company's game revenue / Chen Rui directly manages the game department and focuses on the game business / The unique culture of the platform constitutes a strong moat.

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