Chindex International Gains on Strong Earnings

Chindex International Inc. (NYSE: CHDX), a US-based healthcare company that provides healthcare services and supplies medical capital equipment, instrumentation and products to the Chinese marketplace, reported earnings after the close Wednesday. The company's earnings exceeded expectations on both the top and bottom lines.

For the Sept. 30 2007 quarter, revenues were US$32.7 million, rising 23% over the Sept. 2006 quarter. Net income grew over 45% to US$1.6 million, and earnings per basic share were US$0.22. Consensus expectations were for revenues of US$32.3 million and EPS of US$0.13, so the company's results represent a positive earnings surprise.

"Our continuing bottom line performance on a consolidated basis this quarter was again led by an increase in the profitability of our Healthcare Services division. This was fueled by continued growth in inpatient and outpatient results in both the Beijing and Shanghai markets," said Chindex CEO Roberta Lipson. "The Medical Products division reported profitable results for the quarter due to strong performance in imaging and surgical product categories. The market issues which have been impacting us over the past several quarters have not abated completely, however the pent up demand for imported medical devices which has been accumulating over the past two years is driving sales throughout the country now. Our outlook for the Medical Products division continues to be optimistic. We believe the conditions are aligned for continuing good performance in this division in the future."

On a six month basis, healthcare service revenues accounted for US$30.7 million or 52% of total revenues. Operating margins for the quarter were 8%, with healthcare service margins of 13.5% and medical products margins of 1.7%.Management confirmed that the company is moving ahead with its long-planned entry in the Guangzhou market, commencing with construction on an outpatient facility prior to developing inpatient services. Chindex is also planning a second Beijing facility and is expanding programs in preparation for the 2008 Beijing Olympics. The company also announced the investment of US$50 million in the company by JPMorgan Chase & Co. (NYSE: JPM). The investment, in the form of US$10 million in cash and US$40 million in convertible notes, is to fund the company facility expansion plans in China. Shares are trading near their all time high of US$35.63, having risen over 770% in the past 2 years.

Disclosure: none