Ping An’s tech dreams may yet exit intensive care

Ping An Healthcare and Technology Co

16/01/2025 12:00

(The author is a Reuters Breakingviews columnist. The opinions
expressed are his own. Refiles to add hyperlink in paragraph
four.)
    By Chan Ka Sing
       HONG KONG, Jan 16 (Reuters Breakingviews) - Ping An
Insurance  601318.SS   2318.HK  may have a chance to
rehabilitate its fintech reputation. A few years ago the company
was busy spinning off its home-grown internet startups to boost
its valuation. The zest has long gone. Yet a quirky special
dividend is giving it back majority control of beaten-down but
cash-rich Ping An Healthcare and Technology  1833.HK , just as
the online medical firm’s fortunes look set to improve. 
    Few could fault the $110 billion insurer’s carve-outs
timing. Ping An Healthcare went public in Hong Kong in 2018, two
years before online medical services became an investment hot
spot amid the Covid pandemic. Online lender Lufax  LU.N 
followed in 2020, just months before Beijing ushered in a
sweeping crackdown on the internet industry. The lucrative
listings persuaded investors that the parent was as much a tech
firm as a financial one. Its share price soared to a record high
in early 2021, but has since fallen some 60%.
    Ping An Healthcare fell even harder. Its market value topped
out at $21 billion in 2021. But more than 95% of that has since
been wiped out as revenue shrank; at one point last year its
market capitalisation fell below its cash value.
    So in November, the insurer, which kept an almost 40% stake,
proposed that the healthcare company return most of its $1.4
billion cash pile to shareholders. But it then took its payment
in stock, while most of the remaining investors opted for money.
That has boosted Ping An's ownership to almost 53% effectively
without having to pay a cent. That has triggered a mandatory
offer for the rest of the company, under Hong Kong rules, but
Ping An has made clear it has no intention of taking the
healthcare unit private. A similar manoeuvre last year allowed
it to regain majority control of Lufax. 
    Ping An's timing looks good yet again. The medical-service
provider finally broke even in the first six months of 2024
after losing money for the previous nine years. It looks set to
turn a profit this year, and revenue is forecast to grow 10% in
2025, per estimates gathered by LSEG.
    Sure, that won't suddenly boost the insurer's lagging stock.
It currently trades at barely 5 times forecast 2024 earnings,
per LSEG, far short of peer Prudential's  PRU.L  9.5 times
multiple. But it's an encouraging sign that Ping An may be
getting its battered tech dreams out of intensive care.
    
   CONTEXT NEWS
   Ping An Insurance will raise the stake in its medical-tech
unit Ping An Healthcare & Technology from 39.41% to 52.74% as a
result of special dividend scheme, the insurer said on Jan. 8.
The company also said it has no plan to take private the Hong
Kong-listed subsidiary. 
   On Nov. 14, Ping An Healthcare proposed a special dividend of
HK$9.7 apiece, whereas shareholders could elect to receive in
the form of shares.

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Graphic: Fintech spinoffs used to boost Ping An's value    https://reut.rs/4fV6biU
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 (Editing by Antony Currie and Ujjaini Dutta)
 ((For previous columns by the author, Reuters customers can
click on  CHAN/  
KaSing.Chan@thomsonreuters.com))