Will new investor Goldstream bring its Midas touch to Saint Bella?

The investment company disclosed its purchase of 0.3% of the maternity and baby care company’s stock on the open market

Key Takeaways:

• Goldstream Investment acquired 1.83 million Saint Bella shares, equal to about 0.3% of its stock, through open-market purchases 
• The investment company’s stock rose by more than 10 times in July from its low point in June, on excitement about its plans for cryptocurrency-related investments

By Lau Chi Hang 

Hong Kong’s Stablecoins Ordinance has electrified investors since the release of its initial draft on May 21, with buzz building in the run-up to its official adoption on Aug. 1. The ensuing frenzy has bordered on euphoria at times, boosting shares of listed companies announcing development roadmaps for the virtual currencies. Goldstream Investment Ltd. (1328.HK) has emerged as one of the shiniest stocks in that group, experiencing massive gains amid the stablecoin craze. 

In what looks like an unrelated development, Goldstream announced this month that it bought 1.83 million shares of Saint Bella(2508.HK) between July 28 and Aug. 1 in the open market for between HK$7.3286 and HK$7.5536 per share. In total, it pumped HK$13.82 million ($1.76 million) into the stock, accounting for 0.29% of Saint Bella’s total issued share capital. 

Saint Bella, a provider of high-end maternity and baby care services, was established by Xiang Hua, a millennial who graduated from the University of Oxford. In addition to running its signature luxury maternity and baby care centers, the company also provides home-based care and food products for new mothers. It completed seven funding rounds before listing in June this year, securing investment from the likes of Tencent, China Life Investment, Sun Hung Kai and Swire Properties

Saint Bella went public at a price of HK $6.58 per share, bringing in seven cornerstone investors for the IPO, including China Asset Management and SS Morgan Capital. The stock jumped as high as HK$11 on its first trading day, though the gains proved ephemeral and the shares closed last Friday at a less impressive HK$7.48. 

Despite its glitzy business and stable of heavyweight investors, Saint Bella has failed to dazzle the market. That said, Goldstream sees something in the company, raising the question of whether its show of support might help Saint Bella find new legs.

Helmed by a veteran investor

Goldstream specializes in investment management and strategic direct investment and is led by Zhao Linghuan, its chairman and majority shareholder. Zhao is well known in investment circles, and his Hony Capital has 120 billion yuan ($16.7 billion) in assets under management.

Zhao joined PC giant Lenovo in 2003 and later set up Hony, whose investments include such corporate luminaries as China Glass, CSPC Pharma, Zoomlion Heavy Industry, Simcere Pharma, Bytedance, Jin Jiang International Hotels and ENN Natural Gas. The company’s funds also manage a portfolio of commercial real estate China’s largest cities with floor space of 900,000 square meters. 

Formerly known as International Elite, Goldstream was purchased by Zhao in 2018. His golden touch failed to do much for the company’s stock, which was depressed for years and traded around HK$1.50 as recently as June. But an announcement last month finally began to move the needle for the stock, kicking off a remarkable rally. 

Stablecoin mania

On July 4, Goldstream revealed that it signed a memorandum of understanding for a strategic tie-up with AnchorX, an Asian provider of digital currency solutions. The two sides agreed to work together in four areas, namely, cross-border payments, stablecoin applications, digital asset transactions management and blockchain technology investment. 

The move nicely coincided with Hong Kong’s move into the development of stablecoins, a type of cryptocurrency whose underpinning by real assets makes them more stable than other virtual currencies like bitcoin. The announcement lit a fire under Goldstream’s stock, which rose more than sixfold in a single day, at one time trading as high as 10 times its low point in June. 

The company announced at the end of July it would invest $10 million in the development of Web 3.0 businesses and cryptocurrencies, with Ethereum as a blockchain technology of particular interest. That news once again signaled its determination to travel further down the cryptocurrency development path. 

Santa Bella seems to fall outside the cryptocurrency theme, raising the question of what a seasoned investor like Zhao might have in mind for his holdings in the company. Will he continue to increase his stake and, if so, by how much? And what are the implications for Saint Bella? All these questions remain to be answered, but having such a seasoned investor in its corner certainly seems like a signal of confidence for Saint Bella.

Positive profit trajectory

In fact, Saint Bella’s stock is holding up well at the moment, reflecting its improving performance. The company’s revenue has grown steadily over the last three years, rising from 472 million yuan in 2022 to 799 million yuan last year. And its net losses during the period were mostly due to fair-value changes of its financial instruments. Excluding those, it reported a profit of 20.77 million yuan in 2023, which more than doubled to 42.26 million yuan last year. 

Saint Bella issued a profit alert in late July, forecasting it would report its revenue rose 25% to 448 million yuan in the first half of this year, while it swung to the black with a net profit of 320 million yuan, reversing a 480 million yuan loss a year earlier. Its adjusted profit, excluding fair-value changes of financial instruments and IPO-related expenses, reached 38 million yuan, up 122% year-on-year. All that shows the company continues to move in the right direction. 

Big potential in elder care 

Investors may have reservations about Saint Bella as China’s sliding birth rate dampens demand for maternity and baby care services. The company might be somewhat immune to such demographic shifts, since it caters to high-net-worth families that value service quality much more than cost. 

Moreover, the company’s other focus on elder care services looks more promising as China’s aging population creates demand for such premium services that consumers can increasingly afford and are willing to pay for. That means that many investors, including Goldstream, may be betting as much on the company’s expanding elder care services as they are on its original maternity services. If it can succeed in both spaces, the future could indeed look bright for Saint Bella, which, in turn, could translate to nice gains for Goldstream as more investors discover the stock. 

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