beyondbrics

While Chinese internet companies have been rushing to list in New York, and Chinese banks are set to raise billions with issues on the mainland this year, there’s one sector that looks rather underrepresented in the equity issuance whirlwind – healthcare.

Shanghai Pharma – which announced the pricing of its Hong Kong IPO on Monday – may benefit from a dearth of new options for those looking for a slice of China’s healthcare boom.

Shanghai Pharma is raising around $2bn by selling H-shares at the mid-point of range – at HK$23 – representing a small discount to its Shanghai listing, and equivalent to a P/E ratio of around 27 times earnings. While above the Asia ex-Japan average for the healthcare sector – which is 21 times earnings – Shanghai Pharma looks favourably priced next to its main rival, Sinopharm(1099:HKG), which trades in Hong Kong at over 40 times earnings. The company has a market cap of around $6bn.

China’s healthcare sector is booming, and the country is well on the way to becoming one of the world’s top drugs markets. Profits in the sector are expected to rise 25 per cent a year, according to Sinolink Securities.

And China’s ageing population is likely to provide a further boost. Demographics have already spawned a boom in retirement property development – or ‘silvertowns’ – as described by the FT’s Patti Waldmeir.

Having already signed up some heavy-hitting cornerstone investors, including Temasek and Pfizer, the listing looks in decent shape. While it’s unlikely to soar on debut – Hong Kong listings tend not to wildly outperform their mainland counterparts – international appetite for a slice of China’s healthcare sector is sure to be robust. Amid choppy markets dominated by cyclical plays, this looks like a relatively safe bet.

Related reading:
West’s drugmaker look for China buys, beyondbrics
China looks forward to age of the ‘silvertown’, FT
Shanghai Pharma eyes $2.2bn offer, FT