New Hong Kong Tech Darling Hawks IPO With Rare Valuation Metric

(Bloomberg) -- 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 $1.1 billion 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 price-to-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 health-care 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 percent last year to 1 billion yuan ($159 million), 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 Monday. Such mom-and-pop stock buyers will subscribe for HK$66 billion ($8.4 billion) 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.

The Ping An Insurance (Group) Co. subsidiary will take investors orders from Monday through April 26, the prospectus shows. It aims to begin trading May 4.

Soon, the floodgates will open for even more types of unprofitable firms to list. New Hong Kong listing rules will take effect by early May, the head of the local bourse operator said Friday. By then, Hong Kong will start accepting listing applications from pre-profit biotech firms and companies that have weighted voting rights.

--With assistance from Fox Hu

To contact the reporter on this story: Crystal Tse in Hong Kong at ctse44@bloomberg.net.

To contact the editors responsible for this story: Ben Scent at bscent@bloomberg.net, Timothy Sifert

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