JBM Healthcare gets bitter pill from investors on anemic performance

Shares of the over-the-counter traditional Chinese medicine company tumbled after it reported sequential revenue and profit declines in the second half of its fiscal year

Key Takeaways:

• JBM Healthcare’s profit edged up 1.9% in its latest fiscal year through March
• The over-the-counter traditional Chinese medicine company’s full-year dividend payout ratio reached a generous 70%.

By Lau Chi Hang

It’s safe to say that most ordinary consumers have never heard of JBM (Healthcare) Ltd. (2161.HK). But the brands from its proprietary cabinet of over-the-counter (OTC) traditional Chinese medicines (TCM), like Po Chai Pills, Ho Chai Kung, Flying Eagle Woodlok Medicated Oil, and Tong Tai Chung Woodlok Oil, are household names in Hong Kong, as well as adjacent Guangdong province. 

JBM Healthcare was spun off from Jacobson Pharma (2633.HK) in February 2021 and separately listed in Hong Kong. But even before that, Jacobson Pharma was stocking up its cabinet of well-known TCM brands. Jacobson acquired Li Chung Shing Tong, the century-old enterprise behind the Po Chai Pills dynasty, in 2008 by taking advantage of a succession dispute within the Li family. It later purchased the familiar Tong Tai Chung Woodlok Oil brand. And in 2016, Jacobson splashed out HK$560 million ($72 million) to buy out Ho Chai Kung, a legacy Chinese cold remedy.

By 2017, Jacobson had also snapped up indigestion drug Saplingtan, Shiling Oil, which is used to treat minor aches and pains, and cold and flu remedy Col-gan from Ling Chi Medicine Co., rounding out its stable of traditional Chinese medicine brands. Jacobson repackaged and integrated those brands into JBM Healthcare before taking the company public as its flagship vehicle for OTC Chinese medicines.

Lackluster performance

But JMB Healthcare seems to have come down with its own financial malaise lately, in the form of anemic growth disclosed in a new financial report last week for its latest fiscal year through March. The company reported revenue of HK$835 million for the 12-month period, up 6.7% year-over-year, and a profit of HK$201 million, up 1.9%. In keeping with its tradition of generous payouts, the company announced a final dividend that lifted its dividend for the year to HK$0.171 per share, up 0.6% from fiscal 2025.

Despite the stable – if not remarkable – revenue and profit growth and continuation of strong dividend payouts, the company’s shares took a massive dive the day after the earnings release. The stock tumbled out of the gate, and ultimately fell below the HK$2 mark to close down 14% for the day at HK$1.96.

A more in-depth dissection of the numbers reveals that JBM Healthcare’s performance showed significant signs of weakening in the second half of its fiscal year. Calculations using data from the company’s midyear report for the first half of the fiscal year show its revenue and profit came in at HK$405 million and HK$86 million in the second half of its fiscal year, respectively, representing a sequential declines of about 6% and 25% from the first half.

JBM Healthcare’s two main product categories both suffered declines in the latest six-month period. Second-half sales from its branded medicines totaled around HK$130 million, down more than 15% from the first half. At the same time, sales of its proprietary Chinese medicines slipped about 2% to HK$230 million over the same period. Only sales of the company’s health and wellness products – a smaller category – managed a modest sequential uptick of 4.5% to HK$44.08 million.

Despite that weakness, the company’s expenses still rose notably over the past fiscal year. Its selling and distribution expenses increased by 7.5% year-over-year to HK$132 million, while administrative and other operating expenses jumped 27% to HK$80.26 million. Financing costs during the period, while relatively small, also skyrocketed by 162% from HK$4.46 million in fiscal 2025 to HK$11.69 million in the latest fiscal year.

Final dividend tumbles 

While the company kept its high-dividend policy intact for the full year — a major draw for investors — the final dividend amounted to just HK$0.0735. That figure was down by a hefty 36% from last year’s final dividend, and was also 24.6% lower than the dividend announced for first-half of the company’s fiscal year. Put differently, the company’s dividends for all of its latest fiscal year only held steady due to the relatively generous payout in the first half of that year.

The sharp share selloff reflects a clear disconnect between the company’s results and market expectations. Many were probably expecting much better, especially given the surge in Mainland Chinese tourists coming to Hong Kong over the past year after Beijing relaxed travel restrictions. A mild economic recovery in Hong Kong also probably led investors to believe that local residents would be consuming more of the company’s products. Yet, the second-half sequential profit decline, when many may have been hoping for an increase, and the slashing of the company’s final dividend, left investors understandably disappointed.

The reality is the company’s financial health isn’t as robust as it once was. Its cash continued to shrink over the past fiscal year, dropping from HK$205 million in fiscal 2025 to HK$120 million by the end of March this year — a 41% decline. Its trade and other receivables, meantime, swelled by nearly 76% to HK$288 million by the end of the latest fiscal year.

On the debt front, the company’s short-term bank loans showed signs of improvement, falling by 23% to HK$115 million. But its long-term bank loans moved in the other direction, swinging from zero in fiscal 2025 to HK$250 million in the most recent fiscal year.

Wait-and-see approach

Despite the apparent disappointment over the latest results, the company appears to be on relatively sound footing overall. Its gearing ratio sits below 22%, and its cash is sufficient to cover all of its bank loans due within a year. While the second half of its fiscal year wasn’t the greatest, it does just represent one six-month window and might merely be a transitional blip, with the potential for a near-term pickup if recent economic trends continue.

Moreover, JBM Healthcare is cultivating a second growth curve, setting its sights on TCM clinic operations to complement its current stable of TCM products. Last June, it bought Kenford Medical Group for HK$38 million, giving it Kenford’s chain of TCM clinics. And late last year, JBM paid another HK$36 million for King Pui Chinese Medical Group and Siulun Medheart Co., which both operate TCM clinics and offer medical services such as orthopedics and chiropractic care.

For now, at least, JBM Healthcare continues to look like a relatively solid enterprise. Its projected price-to-earnings (P/E) ratio is roughly 7.6 times, closely mirroring the 7.4 times for rival TCM company Baiyunshan (0874.HK). Investors might want to stay on the sidelines temporarily and scrutinize the company’s next report for the six months through September when it comes out later this year. Consideration of its ability to sustain its dividend payouts may also be warranted before pulling the trigger on any new investment.

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