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UMP Healthcare (722 HK - US$83 million) is a Hong Kong-based provider of healthcare services, offering both general and specialist care across 56 clinics. They also provide corporate healthcare plans that offer access to both their own clinics as well as those in a much larger affiliate network.
I got inspiration for this report from Smartkarma, who has coverage of the company and has met the management team.
From a top-down point of view, Hong Kong’s healthcare sector looks incredibly attractive. The population is aging, with 60-64 year olds being the single largest age group in Hong Kong. As these individuals enter the age at which they start consuming healthcare services to a greater extent, growth will be boosted.
UMP Healthcare was started by a medical doctor called Sun Yiu Kwong. Today, his doctor son is also involved in the business as a co-CEO. And banker son-in-law Patrick Tsang deals with M&A, helping the group structure deals in China and elsewhere.
Since the IPO in 2015, the stock has languished, despite greater profitability. Part of the reason is a failed foray into mainland China. It could be that the mainland market is just too difficult, given that Chinese citizen enjoy subsided care at state hospitals. Another potential explanation is UMP mismanagement. A number of the transactions were with related parties with clear conflicts of interest.
COVID-19 probably helped the business, overall. While the number of patient visitors decreased, that also helped lower payouts to clinics for capitation plan members. Then there were an increased number of highly profitable health screenings, as well as vaccinations against COVID-19.
What speaks for greater profitability post-COVID is the fact that UMP has acquired a large number of imaging & laboratory centres, which enjoy ~50% gross margins.
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