United Orthopedic Corp (UOC, 聯合骨科), which designs and manufactures orthopedic implants and instruments, is expected to see its earnings per share rise 37.2 percent next year, as its efforts to tap China’s rapidly growing market are to be aided by a newly formed partnership with a local firm, analysts said.
The company yesterday announced that it is to form a 300 million yuan (US$47.07 million) joint venture company with China’s Shandong Shinva Medical Instrument Co (新華醫療集團), a medical manufacturer, and a provider of logistics and hospital management services. UOC told an investors meeting that it is to hold a 49 percent stake in the venture.
“On an annual basis, we expect net profit for the company to increase 64.9 percent this year and 37.2 percent next year, to NT$135 million and NT$185 million [US$4.09 million and US$5.6 million] respectively,” Yuanta Investment Consulting (元大投顧) analyst Peggy Lee (李珮菁) said in a report published on Thursday.
Lee said that the earnings projection factors in dilution effects of UOC’s recently issued 12.8 million shares to raise NT$589 million to fund product expansions.
The partnership is expected to provide UOC with logistic support in China, including the handling of inventory and account receivable collection issues between the Taiwanese company and local distributors, Lee added.
“We believe that Shangdong Shinva would be a powerful partner for UOC to expand its exposure in China,” Yuanta Investment Consulting analyst Yvonne Tsai (蔡昀真) said July, when the two companies signed a memorandum of understanding.
Inventory and accounts receivable collection were two key issues that had caused UOC to act conservative on China, Tsai added.
UOC’s performance dipped last quarter, with net income falling 22.5 percent to NT$40 million, or NT$0.56 per share, and sales going down by 17.2 percent to NT$323 million. Lee attributed the declines to the company’s decision to shift out of lower margin original equipment manufacturing businesses.
“Our partnership is to enable the company to seize opportunities in China, where Beijing is planning to source 70 percent of orthopedic implants sold in the nation from local producers by 2025, and eventually displace imported brands,” UOC chairman Jason Lin (林延生) said.
“Taiwan is to be our research and manufacturing base for our tier-one products, while China is to handle low-tier products,” Lin said.
Shandong Shinva manages about 20 hospitals in China, with sales reaching 6.3 billion yuan last year and its total assets were estimated at about 8.5 billion yuan as of the end of March. It also provides medical logistic services to the US pharmaceutical company Johnson & Johnson in China.
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