DC Healthcare Holdings (DCH) intends to raise RM49.8 million from its initial public offering, primarily to fund its expansion plans, working capital needs, and to pay down its borrowings. It will be the first aesthetic service provider to be listed on the ACE Market.
“DCH’s strong geographical presence, coupled with its established brand, specialising in non-invasive and minimally invasive procedures, should propel its 3-year earnings compounded annual growth rate to 47% from 2023-2025,” said RHB Research (RHB) in the recent Small Cap Asean Research Report.
DCH has allocated 19% of its initial public offering proceeds to set up eight new clinics by 2024. This is expected to open opportunities for DCH to make its foray into Penang and Johor Bahru.
In view of the stringent regulatory requirements, the group is anticipating four of its resident medical doctors to obtain LCPs (Letter of Credentialing and Privileging) by 2024, followed by 16 and 5 by 2025 and 2026 respectively.
Note that the guidelines for processing clinic registration of private medicine and dental clinics only require one medical practitioner per private clinic. As at the last practicable date (LPD), DCH still has three LCP medical practitioners, which RHB deems sufficient to meet its expansion plans for the remainder of 2023.
The aesthetic market is estimated to grow at a 20% compounded annual growth rate from 2022-2025, underpinned by growing income per capita, increasing awareness, and the influence from social media. DCH has been proactively engaging on social media platforms to boost its brand awareness.
Notably, aesthetic services offered by DCH such as dermal fillers and “botox” injections, which typically last for 3-18 months, will provide the group with opportunities to tap into repeat purchases, as customers will typically re-visit the clinic for restoration/touch-up services.
“Also, over 80% of group revenue (body contouring and skin care, which are non-refundable) are sold on a package basis (3-24 months), which provides earnings visibility,” said RHB.
DCH currently operates 13 aesthetic medical clinics in Malaysia. Eleven of the 13 clinics are strategically located in the Klang Valley, which has the highest household income.
Malaysia’s high income (above RM10,960) population grew to 47.2% in 2020 from 46.2% 2016. RHB expects the growing high-income population and DCH’s expansion to the northern region to open new opportunities and anchor its revenue growth moving forward.
“We project a 3-year earnings compounded annual growth rate of 47% from financial year 2022-2025, and ascribe a price earnings ratio of 18x to its financial year 2023 future earnings to derive our fair value of RM0.43,” said RHB.
Key risks identified by RHB are such as the shortage of LCPs in the industry, risk of medical claims arising from aesthetic services, competition from beauty centres.
