Ugly Stock Plunge for Aesthetic Medical

Stock falls 9% after acquiring fellow skincare provider Hanfei.

Author: Anthony Russo   

Shares of Aesthetic Medical International Holdings Group Ltd. (Nasdaq: AIH) tanked nearly 9% in early trading Tuesday after it announced a deal to acquire a fellow skincare provider Guangdong Hanfei Investment Management Co., Ltd.

Under the deal, the Shenzhen-based company intends to obtain 51% of the equity control in Hanfei, which operates four aesthetic medical treatment centers in China, according to its statement today.

The company continues to target expansion in the aesthetic medical sector. In April, Aesthetic Medical (AIH) announced it would acquire a controlling interest in two treatment centers: Shanghai Mingyue Aesthetic Medical and Xi'an New Pengai Yueji Aesthetic Medical Clinic. By 2020, the medical aesthetic market is anticipated to rise 25% annually and be worth 300 billion yuan in China, ($43 billion) according to CITIC Securities. 

According to AIH, Hanfei will help support the company with "highly standardized operating procedures across a centralized network" under the new deal. 

"This transaction will enhance our capabilities and expand our customer base, while also providing us with a partner that shares in our commitment to customers and can add strategic and operational value," Zhou Pengwu, the chairman and chief executive officer of AIH, said in a statement today.

He added, "Based on our solid reputation and extensive experience in aesthetic medical industry, we are confident that our acquisition will enable us to execute on our strategy and next phase of growth." 

Yet all these expansion plans have yet to impress investors. The stock has tumbled 43% to date from its close of $9.37 per American depositary share on Apr. 24. 

Operating for more than 20 years, AIH provides surgical aesthetic and non-surgical treatments along with other general medical services. With a presence in Hong Kong and Singapore, AIH operates treatment centers spread across major cities in China. The company describes itself as the third-largest private aesthetic medical services provider in China in 2018 in terms of revenue.

In the three months through March, AIH's revenue plummeted 50% year-over-year to $12.9 million. Net loss was $11.7 million, or 17 cents per share, in contrast to a net income of $3.2 million, or 5 cents per share in the same period in the preceding year.

As of Tuesday morning, AIH traded at $5.35 per share. Shares of AIH are down 16% year-to-date.