And Finally

Vain IPO attempt

Shenzhen nip-and-tuck hospital to go public


Everlasting beauty: Liu Xiaoqing

After achieving the top score in the university entrance exam in June, Zhao Haoyu, a high school student from Yunnan province, told the China Daily that his phone has been ringing off the hook with endorsement offers. Beverage firms, mobile phone companies and training schools have all tried to tempt him, and a plastic surgery clinic even wanted the high school student to appear in its commercials.

Zhao, however, couldn’t be convinced. “My parents and I are not interested in commercials,” he told the newspaper. “I’m not a celebrity or a superstar.”

Cosmetic medical services have become the fourth most popular way to spend discretionary income, according to Ma Xiaowei, China’s vice health minister (trailling only houses, cars and travel in spending terms).

And to tap the nip-and-tuck craze, earlier this month a Chinese plastic surgery hospital detailed its plans to list in Hong Kong. If successful, Pengai, which is based in the southern city of Shenzhen, will become the first cosmetic surgery practice in China to go public. It currently has 15 surgeries under management and the proceeds of the IPO (the fundraising size is yet to be decided) will be used to finance further expansion.

One of Pengai’s main selling points is its shapely margins. Since 2011, it has consistently recorded gross margins of more than 60% for surgical services. Non-surgical services (like Botox injections) boast even better returns. Last year Pengai’s total revenues reached Rmb424 million ($68.95 million), up from Rmb292 million in 2011.

Industry insiders seem upbeat about Pengai’s prospects. “It is going to be hugely popular with investors because there is nothing comparable in the capital market,” Zhang Jinming, director of plastic surgery at the Sun Yat-sen Memorial Hospital explained to Guangzhou Daily.

“For the plastic surgery hospitals that don’t really have a lot of brand recognition, Pengai going public will also enhance their reputation.”

Ahead of its IPO, Pengai has taken steps to glamorise its image. Its spokesperson is the well-known 1980s Chinese actress Liu Xiaoqing, who has also invested in the group. But analysts warn that the industry’s legal risks can be high. The Guangzhou Daily has reported that there are over 20,000 lawsuits filed every year against plastic surgery practitioners for malpractice or complications resulting from cosmetic procedures. Pengai itself has paid out over Rmb6 million in compensation in the past three years.

“I handle a lot of patients who needed corrective revision surgeries. I’ve corrected many sloppy nose jobs. These days the number of rhinoplasty [an injection up the nose] that have gone wrong has been going up,” warns Zhang from Sun Yat-sen Memorial Hospital, adding that faulty procedures could result in organ necrosis and skin disfigurement.

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