HONG KONG (REUTERS) - JD Health International saw its stock soar 65 per cent above its issue price in its Hong Kong trading debut on Tuesday (Dec 8), as investors bet on the growth prospects of a healthcare business boosted by the Covid-19 pandemic.
JD Health is a subsidiary of e-commerce giant JD.com specialising in online medical consultation and pharmaceutical sales. It was among a host of platforms offering consultation for Covid-19 symptoms during the height of China's coronavirus outbreak earlier this year.
The pandemic has had a "revolutionary impact" on healthcare as both patients and doctors are now more willing to seek and provide treatment over the internet, Chief executive Xin Lijun told reporters at a briefing in Beijing on Tuesday.
JD Health's initial public offering (IPO) prospectus showed a 36 per cent on-year growth in annual active users at 72.5 million at June-end.
The company sold shares in its IPO for HK$70.58 each, pulling in US$3.48 billion (S$4.66 billion) and a valuation of US$29 billion. The stock opened at HK$94.50 before reaching as high as HK$116.80, pushing the firm's valuation beyond US$40 billion.
The stock, Hong Kong's most actively traded stock by turnover, bucked a downward trend in the broader local market with the benchmark Hang Seng Index down 0.5 per cent.
Kingston Securities executive director of research Dickie Wong said a market capitalisation of such size should see JD Health fast-tracked into the Shanghai Hong Kong Stock Connect and Hang Seng technology index.
"Investors are thinking they don't want to wait to buy," he said. "Once the stock moves into the tech index, then index funds have to buy it no matter what they think of the company so investors are taking advantage of the likely move now."
The debut trading pop could make the stock vulnerable to a swift sell-off, said Everbright Sun Hung Kai research analyst Kenny Ng.
"JD Health provides a good opportunity for profit-taking in the short term if its share price is above HK$100 since IPO investors have already got around 40 per cent return," he said.
CEO Xin said JD Health might spend some of the IPO funds buying brick-and-mortar pharmacies.
"Investment is needed to bring more pharmacies and hospitals online into our system," he said.
JD Health's IPO was Hong Kong's largest this year, followed by China Bohai Bank's US$2.05 billion July listing. Dealmakers expect more activity during December.
The float took Hong Kong's 2020 IPO proceeds beyond US$25 billion from over 100 deals, on track for the best year in a decade, Refinitiv data showed.
Adding secondary listings - including JD.com's US$4.4 billion transaction in June - the figure stands at US$39.1 billion.