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Invest in China's Healthcare Industry with Shares of Mindray (MR)
Paul Goodwin - Cabot China & Emerging Markets Report By: Paul Goodwin
Editor
Cabot China & Emerging Markets Report

Published: August 10, 2007

China has the longest string of double-digit growth years on the planet, and that's a powerful engine. Russia, India, and Brazil are also growing strongly, but China will probably be the "Big Dog" for the foreseeable future. Even with the unpredictability of its government and the volatility caused by so much hot money (foreign and domestic) chasing stocks around, the opportunities in China are still huge.

There's one China stock in particular that I've had my eye on. It's a medical equipment company that came public just last September. It is liquid, pays a small dividend, and reported after-tax profits of nearly 30% last quarter. Plus, it has one of the best company names I’ve ever heard.

The company is Mindray Medical (NYSE: MR, $33.88), a Chinese maker of medical devices that designs and manufactures 40 products, including patient monitoring devices, diagnostic laboratory instruments, and ultrasound imaging systems. The stock came public just last September and has already more than doubled. But there's a deeper story here.

According to the Chinese government's Ministry of Health, in 2005 there were about 18,700 hospitals and 41,700 healthcare clinics in China. In 2002, the latest year for which figures are available, these hospitals bought 85% to 90% of their medical equipment from manufacturers outside China. And finally, the increasing urbanization of China and the outbreak of SARS in 2003 have brought it home that healthcare in China needs an immediate focus on quality and quantity of care.

These statistics help to paint a picture of a country with enormous potential as a market for medical equipment. And Mindray is in the right place with the right products.

A look at Mindray’s chart shows a stock that came public at 14 and moved smartly up the chart to 27 in less than three months. But at that point, MR stalled out. Partly this was due to a need to digest post-IPO gains. And partly it was because Mindray's business has a seasonal swing to it. With the profitable fourth quarter (traditionally its strongest) on the books, and the weaker first quarter in view; investors were a little shy about putting their money down.

But it's the early investor that gets the worm, and MR's small-but-growing roster of institutional sponsors shows that some big investors are ready to take the chance. This one will bear watching, and when it gets organized for another advance, it could be a very profitable stock to have around. 

Paul Goodwin
Editor
Cabot China & Emerging Markets Report

About Paul Goodwin [includes/bios/goodwin.htm]


 

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