Aoyuan HL announced the acquisition of 55% equity interest in Zhejiang Liantianmei Corporate Management co. Ltd. (“Liantianmei”), a medical aesthetic services company with two private hospitals under its name. This is a major step towards constructing a community healthcare platform to complement the Company’s property management business.
- Acquisition of medical beauty company. Aoyuan HL announced on Friday the acquisition of 55% equity interest in Liantianmei, a medical aesthetic company in China specializing in cosmetic surgery. Liantianmei operates two private medical aesthetic hospitals in Hangzhou and has more than 0.3mn customers. In 1H20 Liantianmei recorded a revenue of RMB 212mn and net profit of RMB 46mn, representing a drastic improvement in profitability which the Company attributes to effective cost control and resilient demand amidst COVID-19. Consideration for the acquisition is set at 16.7x 2020 P/E, and capped at 691mn which we expect will be reached.
- Pioneering the community healthcare concept. The Liantianmei acquisition represents a major step in developing a comprehensive community healthcare platform, building upon previous efforts including eldercare services and Traditional Chinese medicine services. The Company targets 10-15% bottom line growth for acquired companies, and expects the healthcare segment to make up 20%-30% of total revenue in the long run.
- Employing a multi-pronged growth strategy. With the addition of community healthcare, the Company now operates three major segments. For property management, Aoyuan HL targets 75-80mn sq m in contracted GFA (1H20: 73.0mn sq m, 16.1mn sq m managed GFA); in terms of commercial operation, an additional 6-8 mall openings per year. Overall, the Company targets 55%-60% 2019-22 CAGR in revenue (1H20: +39.5% YoY).
- Could see more incentives for non-PM M&As going forward. M&A of non-PM companies is rarely explored, partly because PM companies usually boast relatively cheap valuation (avg. 10-12x 2020 P/E), high and visible growth, and contributes to the GFA target. However, lifestyle or consumption-themed M&As could help expand the scope of service, and may become more attractive as competition intensifies in the M&A market for PM companies.
