• Niks Professional is an established provider of family practice dermatology and aesthetic medical services, with over 25 years of operational expertise. The Group’s businesses, operating in both Singapore and China, also includes a diverse portfolio of medical skincare products and salon services.
   
• Singapore’s private dermatology and aesthetic medicine industry is anticipated to grow at a Compound Annual Growth Rate (CAGR) of 9.0% from 2019 to 2025, reaching S$756 million by 2025, driven by the nation's high rates of skin conditions and a growing interest in skincare. China is one of the top three global markets for skincare products. Valued at US$40 billion in 2022, China’s skincare sector is forecasted to grow at a CAGR of 7.5% from 2023 to 2027.
   
• Niks Professional reported post-invitation earnings per share of 2.13 cents for FY2022, translating to a price-to-earnings ratios of 10.8x. The Board of Directors plans to recommend and distribute dividends of no less than 50.0% of net profit in FY2023.

Niks Professional is an established family practice dermatology and aesthetic medical services provider, with an operating history of over 25 years. The company’s offers a range of medical skincare products and salon services to complement its medical solutions. The Group has operations in two main geographies:

• Singapore - provision of dermatology and aesthetic medical services as well as sale of skincare products; and
• China - sale and distribution of skincare products to hospitals, clinics, pharmacies, retail shops, doctors and consumers.

Overview and Drivers of the Dermatology and Aesthetic Medicine (DAME) Industry (see page H-24 in the Offer Document for list of major industry trends)

• Importance of dermatology in global health: The global demand for dermatological services continues to grow, driven by the prevalence of skin diseases, which impact nearly one-third of the world's population.
• Growing disposable income and focus on skincare: Skincare has taken over cosmetics as the top priority in beauty, especially for the Generation Z consumers. Increasing patient affordability due to growing disposable income is also expected to upsurge the demand for advanced aesthetic procedures.
• Aging population: As elderly individuals often experience deteriorating skin conditions due to systemic diseases, there is an increased need for anti-aging and rejuvenation treatments.
• Growing popularity of aesthetic medicine: The global influence of Hollywood and the K-Wave has transformed beauty standards, fueling the rise of "K-Beauty" and acceptance of aesthetic procedures. There is also a growing interest in grooming among men, particularly in China, offering substantial market growth opportunities.

Did you know? Service providers in the DAME Industry have to be qualified medical practitioners who has the knowledge to operate medical equipment. On the other hand, Beauty therapy (e.g. facial regimes), does not have a medical orientation.

Market Size and Growth Expectation (see page H-9 in the Offer Document for more details)

• Singapore: Singapore's private dermatology and aesthetic medicine industry is forecasted to grow at a CAGR of 9.0% from 2019 to 2025, reaching S$756 million by 2025. This is expected to be driven by the country's high prevalence of skin conditions like dermatitis, acne, and viral skin diseases.
• China: China is one of the top three global markets for skincare products. Valued at US$40 billion in 2022, the China’s skincare sector is forecasted to grow at a CAGR of 7.5% from 2023 to 2027. Rising wealth and interest in aesthetic medical procedures is expected to boost market demand in China. The country alone accounted for approximately 30% of global wealth growth in 2020.

Competitive Strengths (see page 36 in the Offer Document for full list)

• Trusted provider of family practice dermatology and aesthetic medical services. The Group has a team of five experienced doctors averaging 20 years of expertise, allowing it to navigate industry challenges and explore new markets effectively. Furthermore, there is high entry barriers due to the requirement for qualified medical practitioners in the DAME industry.
• Extensive range of medical skincare products under the ‘Niks’ brand and utilisation of up-to-date equipment. The company offers over 100 proprietary products that address diverse skin needs. It consistently launch new products, supported by technological advancements and quality ingredients, to cater to market demands.
• Integrated business segments. As a one-stop solutions provider for dermatological issues, its integrated business segments cater to a broad customer base and facilitate scalability.

Business Strategies and Future Plans

• Organic expansion of business through:
  • Opening of new clinics and outlets, recruitment of healthcare and management professionals, and purchase of new equipment in Singapore
  • Broadening medical skincare products distribution by engaging additional regional agents, expanding geographical coverage in China.
• Expansion of business through strategic acquisitions, joint ventures, and alliances with synergistic partners.

Risk Factors (see page 43 in the Offer Document for full list)

• Business is subject to extensive and evolving government laws, regulations, and licensing requirements and could suffer penalties, additional costs and restrictions to operations if it fails to comply.
• Complaints, legal proceedings, or investigations regarding doctors or staffs could harm the company’s reputation and operations.
• Continued success and growth depend substantially on continuing service and contribution of key management and doctors as well as ability to attract and retain new key personnel and doctors.

Financials

• Revenue increased 4.5% from S$11.2 million in FY2020 to S$11.7 million in FY2021, attributable to an increase in revenue from the Clinics segment and Retail segments. In FY2022, revenue dropped by 5.2% to S$11.1 million due to canceled appointments from border reopening and prolonged lockdowns in China.
• In 1Q2023, revenue fell by S$0.23 million (or 8.0%), primarily attributable to the decline in the Headquarters segment due to reduced consumer confidence amid economic uncertainty in China.
• Adjusted Net Profit After Tax (NPAT) grew by 6.7% from FY2020 to FY2022, with adjusted NPAT margin above 27% across the three years.
• The company does not have a fixed dividend policy. However, the company's directors plan to recommend and distribute dividends in FY2023, ensuring that the dividends amount to no less than 50.0% of the net profit attributable to the owners of the company for that fiscal year.

Valuation

• According to the offer document, Niks Professional reported earnings per share (EPS) of 2.55 cents for FY2022, based on pre-invitation share capital, or 2.13 cents, based on post-invitation share capital. With an issue price of S$0.23, this translates to a price-to-earnings (P/E) ratio of 9x and 10.8x, respectively.
• Net Asset Value (NAV) per share as of December 31, 2022, based on pre-invitation share capital, is 20.44 cents.
• SGX lists 22 stocks under the Healthcare Providers & Services sector. The 10 largest stocks within this segment averaged 0.9% total returns in the year-to-date till 26 October. The 10 stocks have an average P/E of 21.7x, while the P/E ratio of the iEdge SG All Healthcare Index stands at 27.8x.

Source: Bloomberg, Refinitiv (data as of 26 Oct 2023)

IPO Detail

• Issue Price at S$0.23
• Total of 21.8 million invitation shares comprising:
  • Public offer: 1.0 million shares
  • Placement: 20.8 million shares (including 3.669 million shares reserved for management, directors, employees and others)
• Estimated Market Capitalisation S$29.9 million
• Use of IPO net proceeds of S$3.3 million:
  • S$2.2 million - expansion of business through acquisitions, joint ventures and/or strategic alliances
  • S$0.8 million - organic expansions through opening new clinic; and expansion of skincare product distribution business in PRC
  • S$0.3 million - general working capital purposes

Niks Professional’s Business Segments

The Group operates through three main segments:

• Clinics segment, the Group provides family practice dermatology and aesthetic medical services, in addition to selling skincare, beauty products, and medicines at its medical clinics.
• Retail segment, the Group is involved in the sale of skincare and beauty products, as well as the provision of facial services at its salons and retail outlets.  
• Headquarters segment oversees the distribution of skincare and beauty products to customers, including medical clinics and beauty salons, in Singapore and China. Furthermore, it manages the sale of products directly to end-customers in both regions through the company’s online sale platforms.

Did you know?

The market for beauty products is projected to grow by 6% a year to reach approximately $580 billion by 2027, according to a McKinsey report. This is in line with or slightly higher than other consumer segments such as apparel, footwear, eyewear pet care, and food and beverages. E-commerce in beauty nearly quadrupled between 2015 and 2022, and its share now exceeds 20%, with significant runway ahead. The beauty market has also proven to be resilient amid global economic crises and in a turbulent macroeconomic environment, having seen a solid recovery since the global pandemic.

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