U.S. Stock New IPO Outlook | Hong Kong Rehabilitation Institution Functional Regeneration Goes Public in the U.S., Struggling to Grasp the Aging "Wealth Code"?

Hong Kong, as one of the cities with the most severe aging population globally, is facing a profound transformation in its demographic structure, which has also spurred diversified innovations in the elderly care industry and the emergence of some auxiliary enterprises.

Recently, a company named Anew Health Limited (hereinafter referred to as "Anew Health"), which focuses on functional regeneration and pain health, updated its IPO prospectus with the U.S. Securities and Exchange Commission (SEC), planning to issue 3.75 million shares at a price of $4, aiming to raise $15 million and list on the NASDAQ under the stock code "AVG." Previously, the company had submitted a confidential application to the SEC on June 21, 2024.

Annual Revenue Nearly Doubles, Three Therapy Centers "Support" a Segment

According to Zhitong Finance APP, Anew Health has been deeply engaged in the field of pain management and health services for over 16 years since its establishment in 2007, accumulating a certain reputation in Hong Kong with its "ANKH" brand.

The prospectus shows that the company's core technology is the "RDS+" (Restore, Detox, and Strengthen) pain management and functional enhancement method, which integrates traditional Chinese medicine wisdom with internationally advanced energy therapy equipment technology. By combining traditional Chinese medicine with various energy-based treatment and therapy devices sourced internationally, trained therapists can perform a wide range of treatment procedures involving lasers.

From a business perspective, its main operations cover pain management and body function enhancement services, as well as the sale of topical and dietary supplement products. In short, the company focuses on health care and therapy, being a part of the elderly care service industry. The company's treatments and therapies are characterized by being non-surgical, non-invasive, and non-drug, effectively avoiding the pain, discomfort, skin or tissue damage, and related risks associated with traditional treatment methods.

From a financial standpoint, in the past fiscal years 2024 and 2023 (ending March 31), Anew Health's revenues were $40.7966 million and $27.2792 million, respectively, achieving a year-on-year growth of 49.1%. The corresponding net profits were $11.7332 million and $5.2827 million, successfully doubling within the year.

In terms of customer numbers, Anew Health served 8,692 and 8,654 customers in fiscal years 2024 and 2023, respectively, showing no significant change overall. Meanwhile, the gross profit margin increased significantly from approximately 62.7% to about 72.3%, indicating a substantial improvement in the profitability of the company's products or services. Anew Health attributes its significant growth mainly to the increase in pain management and service revenue driven by a focus on high-value service products.

Further breakdown shows that the company's pain management and health management business not only achieved substantial growth within the 2024 fiscal year but also accounted for 99.87% of total revenue, while the sales revenue of health care products accounted for less than 1%.

In response, the company stated that it launched new pain management services in the second half of the 2023 fiscal year, including laser therapy for pain relief and body function enhancement services specializing in weight management. These services generated additional revenue and made significant contributions to the company's overall growth.

However, beneath the impressive financial statements, despite a 122.1% surge in net profit, a closer examination of the cash flow reveals that the company's situation is not as "favorable": the net cash flow from operating activities has significantly decreased by 46.3%, and the surge in net profit has not been translated into actual usable cash inflow, raising concerns about the quality of earnings.

At the same time, the company has significantly slowed down its investment pace, with cash outflows from investment activities plummeting from USD 1.98 million to USD 186,000, a decrease of 90.6%. This may stem from strategic adjustments, completion of prior investments, or a contraction in response to cash flow pressures. The cash and cash equivalents at the end of the period increased by USD 3.3 million, but this growth primarily relied on substantial cuts in investment expenditures and financing outflows, rather than strong contributions from operating cash flow, raising doubts about the sustainability of the company's future growth.

Under the trend of social aging, is Traditional Chinese Medicine + therapy ≠ the wealth code?

With the intensification of population aging, the elderly care market in Hong Kong is undergoing significant changes. According to the latest data, the proportion of the population aged 65 and above in Hong Kong has reached 18.4%, and it is expected to rise to 30.9% by 2036. This trend not only drives an increase in demand for elderly care services but also promotes the diversified development of the elderly care market.

Against this backdrop, the number of non-drug pain management clients in Hong Kong has generally grown rapidly, increasing from approximately 206,600 in 2012 to a projected 281,400 by 2025, with a compound annual growth rate of 2.4%. By 2025, the sales revenue of non-drug pain management services is expected to reach approximately HKD 7.882 billion, compared to HKD 3.207 billion in 2012, with a compound annual growth rate of 7.2%.

So far, the Hong Kong government has taken a series of measures to address population aging, including increasing the construction of elderly care service facilities and encouraging social capital to participate in the development of the elderly care industry. The government plans to increase the number of nursing homes and care facilities in the coming years to meet the growing demand. Additionally, it has strengthened the supervision and management of existing elderly care institutions to improve service quality and safety standards.

This undoubtedly creates a "fertile ground" for the expansion of regenerative function businesses. According to the prospectus, in terms of services, the company utilizes advanced energy treatment equipment, such as lasers, bioelectric currents, electromagnetic, radio frequency, and ultrasound devices, to provide personalized consultation, assessment, treatment, rehabilitation, and education services to clients at three service centers located in prime areas of Hong Kong, targeting various pain and sub-health conditions At the same time, the company also sells a variety of over-the-counter topical products and dietary supplements, such as its own brand products "ANKH Skin Power" and "30s Ice & Warm Rescue," as well as third-party brand products "CHARISMS." These products are available for sale at service centers and the company's online store.

However, it is worth noting that the aforementioned products have not been approved by the FDA, EMA, or other similar regulatory agencies. This undoubtedly poses certain risks to the regenerative function business—there is no guarantee that all equipment, treatment devices, supplies, topical products, dietary supplements, and consumables used are safe, defect-free, or generally meet relevant quality standards. If the equipment or products provided by suppliers are defective, of poor quality, or cause any adverse reactions, the company may face liability claims, complaints, or related negative publicity, which could impact its business operations.

At the same time, all service centers under the company are not registered medical clinics as defined by the "Clinic Ordinance" (Cap. 343 of the Laws of Hong Kong), which regulates the registration, control, and inspection of medical clinics in Hong Kong. Furthermore, the regenerative function business has not employed any registered doctors as defined by the "Medical Registration Ordinance" (Cap. 161 of the Laws of Hong Kong) to provide services in Hong Kong. This also means that the company's business operations may lack credibility, and the non-clinic positioning could lead to a single revenue structure that relies solely on health care services, making it difficult to sustain continuous profitability, which may require investors to exercise caution