FUND RAISING: Doctor App Raises Big Bucks, Hertz Cashes Out of CAR

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Bottom line: Guahao’s new mega-funding spotlights big growth possibilities for private medical service providers, while Hertz could continue to sell down its stake in Car Inc as China’s auto market slows.

Guahao finds riches in medical booking app

IPOs may have ground to a halt due to China’s recent market volatility, but that hasn’t stopped a steady flow of buying and selling into high-growth companies by big investors looking for the next hot trend. One such operator of a medical services app looks like the latest flavor of the day, with reports that a company called Guahao has just landed nearly $400 million in new funding. Meantime, leading rental car operator Car Inc (HKEx: 699) moved in the opposite direction, losing some momentum after early strategic investor Hertz (NYSE: HTZ) sold down more of its stake in the company.

Both of these deals are part of the natural ebb and flow of funds into and out of Chinese companies, and are often a good pointer of where the next trends might emerge. App developers have become a hot investment area, and private medical service providers are also gaining momentum under China’s overhaul of its healthcare system. Meantime, the car market is moving in the other direction due to China’s slowing economy, which is probably making big global names like Hertz less bullish on the market.

Let’s begin our fund-flow round-up with Guahao, whose name is synonymous with the registration process that marks the start of any doctor visit at a hospital or clinic for all Chinese. The company operates an app that lets people book doctor appointments online, a relative novelty in a country where people mostly just show up at a clinic or hospital and then have to queue up and sometimes wait an hour or more to see a doctor.

Guahao was originally rumored to be close to landing $300 million in new funds, but ultimately raised far more with $394 million, according to the latest reports. (English article; Chinese article) The list of investors was quite impressive, including the likes of global giant Goldman Sachs (NYSE: GS), as well as local powerhouses Fosun and Tencent (HKEx: 700).

Building Surgery Centers

Guahao said it will use the new money not only to build up its core appointment-booking app, but also to start establishing its own surgery centers at existing medical facilities run by third-parties. Such a move would put it into the high-growth area for private companies operating medical facilities, in an industry where most hospitals and clinics are currently state-owned.

Private clinic operator iKang (Nasdaq: KANG) became one of the first such companies to list in New York last year, but last month also became the latest US-listed Chinese company to launch a privatization bid. The company’s shares currently trade about 4 percent above their IPO price, which is actually quite good in the current bearish environment. But iKang’s managers probably feel they could have a better future listed on one of China’s domestic markets, and Guahao could follow a similar path.

While Guahao was busy soaking up money, the opposite was true for Car Inc as Hertz sold down its stake in the company. Hertz had originally purchased 20 percent of Car Inc in 2013, but has been slowly selling down the stake since the company’s IPO a year ago. Its latest sale dropped its stake to 13.6 percent from a previous 16.1 percent (HKEx announcement), as Hertz followed in the footsteps of another early investor, Warburg Pincus, in selling down its shares. (previous post)

Hertz probably wanted to lock in some of the big profits it has earned from Car Inc following its IPO about a year ago. Even at its latest price of about HK$12, Car’s Hong Kong-listed shares are still nearly 50 percent higher than their IPO price of HK$8.50. But the shares are well off their all-time high of HK$20 reached earlier this year, which is probably pressuring Hertz to try and protect its profits. Accordingly, we could see Hertz sell down more of its stake to around the 10 percent level or lower, as China’s slowing auto market puts further downward pressure on the shares.

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