KUALA LUMPUR (June 28): Two research houses have issued a "subscribe" recommendation on DC Healthcare Holdings Bhd, which is slated for listing on the ACE Market on July 17.

At the initial public offering (IPO) price of 25 sen per share, the aesthetic medical services provider is valued at 26.04 times price-earnings ratio (PER) based on its profit after tax (PAT) of RM9.56 million for the financial year ended Dec 31, 2022 (FY2022).

Mercury Securities Sdn Bhd said it likes DC Healthcare for its "attractive expansion plans and high technical capabilities", making it well-positioned to leverage on the growth of the local aesthetic medicine market which is forecast by Protégé to grow at a six-year compound annual growth rate (CAGR) of 18.8% from FY2021 to FY2027.

DC Healthcare has a 11% market share by business value in the aesthetic medicine market in Malaysia, the brokerage noted in a research note on Wednesday (June 28).

It gave a fair value (FV) of 60 sen a share for the healthcare company, based on earnings per share (EPS) of 2.5 sen and a PER of 24 times estimated for FY2024, representing a 10% discount to the healthcare sector's FY2024 PER.

Downside risks include a skilled labour shortage and legal claims which could affect the company's reputation, said Mercury Securities.

Meanwhile, Apex Securities Bhd has a slightly lower FV of 57 sen for DC Healthcare, based on an estimated 25 times PER for the company's FY2024 EPS of 2.3 sen, in line with Bursa Malaysia's healthcare index's FY2024 PER (excluding glove counters).

The research house highlighted DC Healthcare's strong three-year CAGR of 43.7% for revenue from FY2019 to FY2022, and a three-year CAGR of 68.2% for profit.

For FY2022, the company's PAT was RM9.56 million, against RM4.6 million for FY2021, RM1.9 million for FY2020 and RM1.2 million for FY2019, Apex Securities said in a note on Wednesday

The brokerage noted that DC Healthcare's revenue for FY2022 amounted to RM52 million, more than double the RM25.5 million made in FY2021. For FY2020, the revenue was RM14.4 million, slightly up from RM12.2 million in FY2019.

Apex Securities further forecasts a 35% growth in DC Healthcare's FY2023 revenue, followed by 69% in FY2024. Net profit, on the other hand, is expected to grow 31% to RM12.6 million for FY2023, and by 79% to RM22.6 million for FY2024.

The research house, however, cited failure to implement expansion plans as a downside risk for DC Healthcare.

According to the IPO prospectus launched on Tuesday, DC Healthcare plans to raise RM49.81 million, with RM9.44 million or 18.95% earmarked for the establishment of new aesthetic medical clinics, RM13.12 million or 26.35% for the purchase of new medical machines and equipment, RM6.24 million or 12.52% for repayment of borrowings, RM17.01 million or 34.15% as working capital, and the remaining RM4 million or 8.03% of proceeds as listing expenses.

Strong track record

Another brokerage, CGS-CIMB, noted that even though DC Healthcare has no fixed dividend policy, the company had a net cash position of RM5 million as of Dec 31, 2022.

DC Healthcare also has an established brand and a seven-year track record under the brand name of "Dr Chong Clinic", with zero legal proceedings incurred against the company to date, CGS-CIMB said in a preliminary assessment report without an investment rating on Wednesday.

DC Healthcare's IPO entails the public issuance of 199.26 million shares, representing 20% of the company's enlarged issued share capital. Of this, 119.57 million shares will be allocated for private placement to selected investors.

Another 24.9 million shares each will be allocated to public investors, and Bumiputera public investors. A further 29.89 million shares are reserved for eligible directors and employees.

The IPO also entails an offer for sale of 99.63 million shares or 10% of the enlarged share capital to selected investors.

The final day for IPO applications is July 5.

Upon listing, DC Healthcare is expected to have a market capitalisation of RM249.08 million.

Read also:
DC Healthcare sets IPO price at 25 sen per share to raise RM49.81m