China’s middle and upper classes are growing. Socioeconomic mobility is, apparently, on the up. As a result, consumer spending patterns are changing. Chinese people are spending their money on a different spread of goods and services.
But increased spending isn’t just going to the luxury goods brands we’re all familiar with. Nor is it all going to premium imported produce, food and wine. Wealthier Chinese are also treating themselves to better health care services. And they’re willing to pay a premium for brand-name care.
Money Morning emerging markets analyst Ken Wangdong covered Chinese healthcare in February. He pointed out that currently, China’s healthcare spending as a percentage of GDP is about half the OECD average. So Ken believes there’s plenty of room for growth — and investment opportunity. In addition to pharmaceutical companies, private hospital operators and device makers, Ken also mentioned traditional Chinese medicine providers.
An Aussie IPO for China’s biggest clinic brand
Traditional Therapies Clinics Limited is planning to float on the ASX later this year. If the float is successful, they’ll trade under the code TTC.
Traditional Therapies Clinics is a holding company with business operations in China. They own one of the largest traditional Chinese medicine chains (by number of clinics), Fuqiao. They’ve got 310 clinics within their networks. The clinics practice a number of disciplines, with a strong focus on traditional Chinese reflexology foot massage. They also offer traditional body massage and therapeutic spa services. According to company records, most of their customers are from China’s burgeoning group of middle and upper income earners. They’ve got a wide target market — mostly between 25 and 65, both men and women.
TTC is planning to raise $15 million by issuing 30 million shares at $0.50 each. They want to use the money to acquire more clinics. In the past, Fuqiao clinics were mostly franchises. But the current management team reckons they can make more profit from wholly owning each clinic. So they’re going to buy more.
The offer is made up of a general public offer, a broker firm offer, a bookbuild facility, and an institutional offer. You can get the prospectus here. Though if you’re interested, it’s worth noting that the minimum application is $2,000. And of course, any profits coming back into Australia will be subject to Australian dollar–renminbi (yuan) exchange rate fluctuations. Make sure to speak to your financial adviser to see whether it fits your needs.
By the way, if you’re interested in investing in Chinese companies, don’t miss Ken’s report ‘Three Emerging Markets Primed For Explosive Growth in 2015’. Co-authored with Money Morning editor Kris Sayce, this report discusses what’s going to happen in China for the rest of the year — and how you can benefit. You’ll also learn about two other emerging markets, including a wildcard nation you might not have considered before. Click here to find out how to download your free copy.
Contributor, Money Morning