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Plans by the Chinese government to invest $125bn (£89bn) in its healthcare market over the next three years should provide a welcome tonic to Hutchison China. Its largest division is China Healthcare and last year it sold over 4bn doses of medicine.
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Indeed, the China Healthcare unit boosted sales 31 per cent in the period to $80.7m, and operating profits there soared 34 per cent to $9.1m. Hutchison has three joint ventures selling a wide range of products that include drugs used to combat flu, chest congestion and heart disease. New sales channels are doing well and the acquisitions of more products are planned. Moreover, with three new shops opened last year, the group's Sen retail business now trades from nine London outlets - selling products ranging from herbal teas to Chinese medicines. While still loss-making, management hopes to boost sales by launching its most popular product lines in 125 concessions in the French-based retail chain, Marionnaud.
Meanwhile, research and development arm MediPharma fell deeper into the red as it continued to burn cash. The most significant trial has been for a drug to treat Crohn's disease - the outcome of this is expected in June.
Panmure Gordon expects pre-tax losses of $2.8m 2009, although it's worth noting that this figure is flattered by a possible $8m windfall should the Crohn's disease product prove successful.
HUTCHISON CHINA MEDITECH (HCM) |
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|---|---|---|---|---|
| ORD PRICE: | 52p | MARKET VALUE: | £26.6m | |
| TOUCH: | 48-55p | 12-MONTH HIGH: | 128p | LOW: 35p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 147¢ | NET DEBT: | $30.6m | |
| Year to 31 Dec | Turnover ($m) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2005 | 37.8 | -6.23 | -18.5 | nil |
| 2006 | 50.4 | -5.77 | -21.0 | nil |
| 2007 | 65.1 | -10.0 | -23.6 | nil |
| 2008 | 87.0 | -14.8 | -34.7 | nil |
| % change | +34 | - | - | - |
£1=$1.40 |
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Chinese conglomerate Hutchison Whampoa holds 75 per cent of the shares - leaving a limited free float. But the shares have tumbled since the autumn, which doesn't do full justice to the group's prospects. Long-term good value.
Last IC view: Good value, 122.5p, 8 Aug 2008
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