Catalyst impact amplifying: Share price +18%, favorable policy details unveiling to drive momentum (BUY)
- As DBS expected in Jan, the supportive policy for state-owned enterprises (SOE) hospitals is just passed, SOE hospitals operator CR Medical (1515 HK) will benefit
- During DBS Pulse Of Asia conference today, CR Medical top management estimated that the govt funding, R&D projects to attract talent, patient visit will increase
- CR Medical’s share price up 18% today with HK$131m turnover, well above average daily turnover of HK$9.5m in last 3 months. As more positive policy details to release and the stock is just trading at 0.8x PB, the strong momentum will continue
- Re-iterate BUY, TP HK$9.4
What’s new?
CR Medical’s share price surged by 18% today, daily turnover HK$131m, well above average daily turnover of HK$9.5m in last three months.
We believe this is because the Chinese communist party commission in State-Owned Assets Supervision & Administration Commission has just passed the supporting policy for SOE hospitals yesterday and the commission will discuss with related government departments for formal approval and implementation of the policy, according to SINA.
During DBS Pulse Of Asia conference today, the top management shared their estimation about development of this event. We believe the following highlights can move share price:
1) Even though the policy is just passed by Chinese communist party commission in State-Owned Assets Supervision & Administration Commission and not yet formally approved, China government allows media to report it. That implies a version agreed by all related government departments is ready. This is the most difficult part but it is done. Formal release of the policy will be soon.
2) Based on the SINA report, the most crucial phase is: “SOE hospitals will be included into local government planning”. After the inclusion, the following items for SOE hospital will be certain:
a. Local government funding for SOE hospitals;
b. R&D projects at National level allocated to SOE hospitals. This is crucial for attracting talents as doctors need to upgrade their professional ranking through participating into these projects and issue publications;
c. Entitled to rank the doctors in their hospitals and input the ranking into government database. As a result, the professional ranking of their doctors will be recognized officially nationwide, crucial to retain talents too;
d. Being formally included into government system of hierarchical diagnosis and treatment, more patients will be referred from government hospitals which helps to boost income;
e. Land for expansion.
Before the inclusion, all the items above are uncertain. The SOE hospitals need to apply case by case.
Our view: the strong momentum will continue
We believe more details of this favorable policy will be unveiled this year which are positive to share price. The stock is now just trading at 0.8x PB, plenty of upside ahead. We expect the strong momentum will continue., Book value per share is HK$6.26.
Re-iterate BUY, TP HK$9.4.