Valuation / Recommendation

We have a SUBSCRIBE recommendation on DC Healthcare Holdings Berhad with a fair value of RM0.60 based on FY24F EPS of 2.5 sen and a PE of 24x which is a 10% discount to the health care sector’s FY24F PE.

We like the stock for its attractive expansion plans and high technical capabilities, well-positioned to leverage on the growth of the Malaysian aesthetic medicine market which is forecasted by Protégé to grow at a 6-year CAGR of 18.8% from 2021 to 2027. The Group has a 11.0% market share by business value in the aesthetic medicine market in Malaysia.

Investment Insights

Investing on the latest technology. The company’s aesthetic clinics are equipped with modern medical machines and equipment which ensure a good quality service to its customers. To support its expansion plans, the company plans to purchase the latest medical machines and equipment to support its aesthetic services. The new medical machines and equipment includes laser machines used for skin and facial treatments, body contouring and hair removal treatments which will be purchased to replace and upgrade existing equipment to enhance its services offerings.

Attractive expansion plans. The company plans to expand its existing clinics by establishing 8 new aesthetic medical clinics in the Northern and Southern region within 18 months upon listing. To support the expansion of its aesthetic medical clinics in other major cities in Malaysia, the company plans to strengthen its team of LCP Certified Aesthetic Physicians, clinic consultants, resident medical doctors, and other support staff via the recruitment of highly skilled and experienced personnel.

The company has 29 resident medical doctors currently undergoing training under the supervision of its LCP Certified Aesthetic Physicians and intends to allocate approximately RM13.9m (27.9% of IPO proceeds) to recruit additional 6 LCP Certified Aesthetic Physicians, 16 resident medical doctors, 56 clinic consultants and 16 management/administrative staff upon the setup of new aesthetic clinics which will strengthen its local presence going forward.

Experienced management team. The company is managed by MD Dr. Chong Tze Sheng who has more than 13 years of experience in medical services, and approximately 11 years of experience in aesthetic medical services. The company was able to achieve a 3-year revenue and PAT CAGR of 62.05% and 101.4% from FY19 to FY22.

Risk factors. (1) Skilled labour shortages. (2) Legal claims which could affect the company’s reputation.

Source: Mercury Securities Research - 28 Jun 2023