Two Hospitals Power Revenue, BenQ Hospital Aims for Hong Kong IPO Again
Recently, the largest private for-profit comprehensive hospital group in the East China region, BenQ Medical Corporation (hereinafter referred to as "BenQ Hospital"), has once again disclosed its prospectus on the Hong Kong Stock Exchange, aiming for a listing on the Hong Kong stock market.
BenQ Hospital primarily operates two hospitals, namely Nanjing BenQ Hospital and Suzhou BenQ Hospital, with a total of 1,850 beds. In the first half of 2024, BenQ Hospital's outpatient visits exceeded one million times, and the annual number of inpatient surgeries exceeded 10,000 cases.
According to the prospectus, the funds raised by BenQ Hospital are mainly planned to be used for the second phase construction plan of Nanjing BenQ Hospital and the third and fourth phase construction plans of Suzhou BenQ Hospital, among others.
The reporter noticed that in recent years, in addition to BenQ Hospital, other medical service companies including Shulan Medical and Lu Daopei Medical Group are also striving for a listing on the Hong Kong stock market. Unlike most medical service companies that are listed or planning to go public and are in a loss-making state, BenQ Hospital has maintained profitability in recent reporting periods. However, Guigang Donghui Hospital, which BenQ Hospital heavily invested in Guangxi, is still in the early stages of development due to its short period of operation and is currently in a loss-making state. Additionally, in the first half of this year, BenQ Hospital's net profit slightly declined year-on-year.
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Regarding the hospital's operations and related issues, the reporter contacted BenQ Hospital but did not receive an effective response.
The main source of income comes from within Jiangsu Province.
According to the prospectus, calculated based on medical service revenue in 2023, BenQ Hospital is the largest private for-profit comprehensive hospital group in the East China region, with a market share of 1.1% in the area. Calculated in the same manner, BenQ Hospital ranks seventh among all private for-profit comprehensive hospital groups in the country, with a market share of 0.4% in China; based on revenue per bed in 2023, BenQ Hospital ranks first among all private for-profit comprehensive hospital groups in mainland China.
Financially, from 2021 to 2023, BenQ Hospital's revenue was 2.224 billion yuan, 2.336 billion yuan, and 2.688 billion yuan, respectively, and 1.33 billion yuan for the first half of 2024. During the same period, the net profit was 69 million yuan, 90 million yuan, 168 million yuan, and 63 million yuan. Nanjing BenQ Hospital opened earlier than Suzhou BenQ Hospital and also has a larger business scale. In 2023, the revenue of Nanjing BenQ Hospital and Suzhou BenQ Hospital was 1.708 billion yuan and 980 million yuan, respectively.
BenQ Hospital's business is mainly divided into inpatient medical services, outpatient medical services, and others. In the first half of 2024, the revenue from inpatient medical services was 686 million yuan, accounting for about 51.6%; the revenue from outpatient medical services was 628 million yuan, accounting for about 47.2%, and other business revenue was 16 million yuan.
The construction period and maturity cycle of the hospital are relatively long. Nanjing BenQ Hospital started construction in 2003 and began operations in 2008. It was rated as a Grade A tertiary hospital from 2022, being the first private hospital in Nanjing to receive this rating. Suzhou BenQ Hospital started construction in 2005 and began operations in 2013, and was approved as a Grade A comprehensive hospital in 2023.At the beginning of its establishment in 2003, Nanjing BenQ Hospital was a mixed-ownership hospital. The shareholders of Nanjing BenQ Hospital included BenQ L, a wholly-owned subsidiary of Qisda, Nanjing State-owned Assets Investment Management Holding (Group) Co., Ltd., and Nanjing Traditional Chinese Medicine Hospital, each holding 70%, 20%, and 10% of the shares, respectively. After several equity transfers, in 2015, Nanjing BenQ Hospital became a wholly-owned subsidiary of BenQ Hospital.
Similar to Nanjing BenQ Hospital, Suzhou BenQ Hospital also had partial shares held by local state-owned enterprises at the beginning of its establishment. Suzhou BenQ Hospital was established in 2004, with BenQ L and Suzhou SuGaoXin Group Co., Ltd. each holding 70% and 30% of the shares. In 2015, the local state-owned enterprises withdrew, and Suzhou BenQ Hospital became a wholly-owned subsidiary of BenQ Hospital.
BenQ Hospital has gone through multiple rounds of financing, and after the latest financing in May 2016, the valuation of BenQ Hospital was $375 million (currently equivalent to 2.655 billion yuan in RMB).
At present, the major shareholder of BenQ Hospital is Qisda, holding 95.02% of the shares, with the remaining shares held by individual and corporate investors.
In the prospectus, BenQ Hospital stated that as the sole undertaking entity and brand for Qisda's medical service business, it plans to accelerate the expansion of its hospitals, build regional medical alliances by strengthening cooperation with primary, secondary, and community medical institutions, and continuously gain new business growth points.
BenQ Hospital stated: "In recent years, although the market for private general hospitals in China has grown rapidly under the influence of government incentive policies, compared to public hospitals, few private general hospitals can establish widespread trust and strong brand recognition among patients. However, we adhere to the medical service philosophy that combines technology, humanity, and care, and with years of honest medical practice and high-quality service output, we have enjoyed a good reputation among patients."
Thanks to the improvement of medical service levels and brand influence, the attractiveness and radiation ability of Nanjing BenQ Hospital to patients from other regions have been enhanced. The prospectus disclosed that from 2021 to 2023, the proportion of inpatients from outside Jiangsu Province at Nanjing BenQ Hospital accounted for approximately 16.9%, 15.6%, and 15.1%, respectively.
To improve medical education and research levels and enrich medical resources, private hospitals often cooperate to become affiliated hospitals of well-known public medical colleges, and BenQ Hospital is no exception. Nanjing BenQ Hospital is an affiliated hospital of Nanjing Medical University, a teaching hospital of Southeast University Medical College, and a teaching hospital of Nanjing University of Chinese Medicine. The prospectus introduced that from 2021 to 2023, Nanjing BenQ Hospital on average accepted about 450 students, interns, graduate students, residents, and senior research students for training and learning.
However, in terms of medical services, the prospectus also disclosed that BenQ Hospital received a total of 432 patient complaints (excluding medical disputes), most of which were related to low service procedure efficiency, poor service attitudes of some medical professionals, insufficient communication with patients, and management.
BenQ Hospital had a total of 267 medical disputes. Most of these medical disputes have been completely resolved through non-material compensation or reduction of treatment fees, but there are still 52 unresolved, with 36 claims, court judgments, or compensation amounts exceeding 300,000 yuan. Among the 267 medical disputes, 58 involved patient deaths. The total amount of compensation and reduced treatment fees required to resolve medical disputes with patients and their families was 14.2 million yuan.Investment in Hospitals Outside the Province Becomes a Drag
In addition to Nanjing BenQ Hospital and Suzhou BenQ Hospital, BenQ Hospitals has also invested in Guigang Donghui Medical Investment Co., Ltd. (hereinafter referred to as "Donghui Medical") and Nanjing Yinxia Health. However, in recent years, both Donghui Medical and Nanjing Yinxia Health have been in a continuous state of loss, leading to an increase in the amount of losses attributed to associated companies.
From 2021 to 2023, the losses attributed to associated companies by BenQ Hospitals were 6.5 million yuan, 22.1 million yuan, and 23.8 million yuan, respectively, and 14 million yuan in the first half of 2024. The majority of the losses attributed to associated companies by BenQ Hospitals came from Donghui Medical. However, the prospectus of BenQ Hospitals stated: "The directors believe that the investment in Donghui Medical is in line with our business expansion strategy, which can strengthen our national layout in the long term and expand our business to the Southeast Asian market."
The core of Donghui Medical is Guigang Donghui Hospital. Located in Guigang, Guangxi, Guigang Donghui Hospital is a third-level hospital that opened in November 2021 and obtained medical insurance qualification in April 2022.
In 2020, BenQ Hospitals first invested in Donghui Medical. In December 2023, BenQ Hospitals acquired 3.65% of the shares of Donghui Medical through the purchase of shares from a third party at a cost of 36.33 million yuan, increasing the shareholding ratio to 17.78%. Additionally, in March 2024, BenQ Hospitals further acquired 7.49% of the shares of Donghui Medical through capital injection at a cost of 100 million yuan, increasing the shareholding ratio to 25.27%.
Data from Tianyancha shows that the first and second largest shareholders of Donghui Medical are Hangzhou Dinghui New Trend Equity Investment Partnership (Limited Partnership) and BenQ Hospitals. The former is a partnership under Dinghui Investment, which also invested in BenQ Hospitals in 2014.
Guigang Donghui Hospital does not use the same brand as BenQ Hospitals. In the prospectus, BenQ Hospitals also mentioned: "Although we have a 'significant influence' on the associated companies and can participate in their financial and operational decisions, we do not have control or joint control over them. The lack of control may limit our ability to influence the financial and operational decisions of the associated companies."
Due to the long maturity period of general hospitals, Guigang Donghui Hospital is still in a loss-making state after nearly three years of operation.
Financial data shows that from 2021 to 2023, Donghui Medical's revenue was 0.04 billion yuan, 0.77 billion yuan, and 1.82 billion yuan, respectively, with net profits of -0.21 billion yuan, -1.42 billion yuan, and -1.56 billion yuan. In the first half of 2024, Donghui Medical's revenue and net profit were 1.17 billion yuan and -0.63 billion yuan, respectively. From the financial data of Donghui Medical, it can be seen that Guigang Donghui Hospital, which has been open for nearly three years, has seen rapid growth in revenue, but the losses are also increasing and it is still in the early stages of operation and development.
Regarding the losses of Guigang Donghui Hospital, BenQ Hospitals stated in the prospectus: "Donghui Medical began operations in 2021 and has been on an upward trend during the historical record period. Donghui Medical has made a large amount of early-stage investments in its development and establishment, while generating relatively moderate sources of income. According to data from Frost & Sullivan, due to the heavy asset nature of hospitals, most of the initial investments are mandatory. Therefore, in the medical industry, newly established hospitals take a longer time to achieve a positive net profit, thereby generating sufficient income to cover the costs and expenses incurred by the initial investments, which is a common situation."BenQ Hospital's second major joint venture, Nanjing Yinxia Health, was established in 2018 and was spun off from BenQ Hospital. It primarily engages in the operation of industrial parks and provides elderly care services in Nanjing. In March 2019, Nanjing Yinxia Health introduced a third-party investor, reducing BenQ Hospital's equity stake in Nanjing Yinxia Health to 30%. In 2020, BenQ Hospital sold 15% of its shares in Nanjing Yinxia Health for a price of 300 million yuan, reducing its stake to 15%.
From 2021 to 2023, Nanjing Yinxia Health's revenue was 0, with net profits of -240 million yuan, -140 million yuan, and -1.2 billion yuan, respectively. In the first half of 2024, Nanjing Yinxia Health's revenue remained at 0, with a net profit of -50 million yuan.