New Hong Kong tech darling hawks IPO with rare valuation metric

HONG KONG: As Hong Kong welcomes listings from unprofitable tech companies, investors need to get used to some new valuation metrics.

Ping An Good Doctor, the largest IPO in Hong Kong so far this year, is approaching potential investors with a valuation of as much as 9.38 times estimated 2019 sales, people with knowledge of the matter said. The loss-making firm is avoiding the more common approach of touting earnings forecasts as it markets the US$1.1bil share sale, one of the people said, asking not to be identified because the information is private.

While fast-growing companies in other countries may market their IPOs using priceto-sales ratios, it’s rare in Hong Kong, where most firms that list already have a track record of profitability. Such sales tactics may become more common as the local bourse seeks to attract more Internet and biotechnology listings amid increased competition with New York and Shanghai.

Good Doctor is offering 160 million shares at HK$50.80 to HK$54.80 apiece in the IPO.

The online healthcare portal is telling potential buyers that the range values the company at 8.69 times to 9.38 times forecast 2019 sales, said the people. It also translates into 5.6 times to 6.04 times Good Doctor’s estimated sales in 2020, the people said.

The company, officially known as Ping An Healthcare & Technology Co, isn’t predicting profits any time soon. Its net loss widened 32% last year to one billion yuan (US$159mil), according to a prospectus. It stated in the filing that it expects to incur a “substantial amount of net loss in 2018” and “may continue to experience losses and negative operating cash flows in the future.”

That hasn’t stopped punters from piling in. Retail investors in Hong Kong are expected to place orders for at least 115 times the amount of stock initially available to them, Ming Pao Daily newspaper reported.

Such mom-and-pop stock buyers will subscribe for HK$66bil (US$8.4bil) or more of shares, the report said, citing estimates based on margin loan applications at local brokerages.

An external spokesman for Good Doctor said he couldn’t immediately comment.

Citigroup and JPMorgan Chase & Co are joint sponsors of the offering.