FAST NEWS: Chaoju Invests 100 Million Yuan in Healthcare Fund

The Latest: Ophthalmic clinic operator Chaoju Eye Care Holdings Ltd. (2219.HK) on Wednesday said it will invest 100 million yuan ($14.3 million) for a 5% stake in a fund that invests in healthcare and medical companies.

Looking Up: Companies like Chaoju rely on returns from such investments to boost their revenue and profits. Thus, good performance by the fund could help to boost the company’s future profits.

Take Note: The investment will deplete Chaoju’s cash holdings, which totaled 1.4 billion yuan at the end of June, according to its latest financial report. Such investments are usually longer-term, meaning Chaoju won’t be able to receive any returns for at least seven years, which is the term of the fund.

Digging Deeper: Based in China’s Inner Mongolia region, Chaoju operates a chain of 18 ophthalmic hospitals and 25 optical centers in five Chinese provinces and autonomous regions. The company is small but its business is relatively stable, with its revenue rising 6.5% year-on-year to 533 million yuan in the first half of 2022. Its profit rose by a faster 29% over that period to 102 million yuan, as the company benefits from better economies of scale as its network grows.

Market Reaction: Chaoju’s shares rose as much as 3.8% on Thursday morning in Hong Kong, and closed up 2.2% at HK$4.25 by the midday break. The stock now trades in the middle of its 52-week range.

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Reporting by Doug Young