Chindex International Inc. (Nasdaq: CHDX)
Bethesda, Md.
http://www.chindex.com/

52-week low / high: $14.54 / $43.75
Shares Outstanding: 8.3 million
Market Capitalization:  $319.59 million

Bethesda, Md.-based Chindex International Inc. (Nasdaq: CHDX) has its finger firmly on the pulse of the demand for high-quality health-care services by China’s growing middle class.   

This small cap divides its business into two divisions: providing health-care services through hospitals and clinics, and distributing and servicing medical equipment. It’s a good space to be in, judging from the third quarter of fiscal 2008, the most recent period for which data is available.

Revenue for the three months ended Dec. 31, 2007, rose 19% to $36 million, compared with $30.3 million a year earlier. Net income from continuing operations was $3.9 million, or $0.50 per share, a five-fold increase from $0.7 million, or $0.10 per share, for the quarter ended Dec. 31, 2006.

“This quarter was again led by an increase in the profitability of our health-care services division,” CEO Roberta Lipson said in a statement. “This was fueled by continued growth in inpatient and outpatient results in both the Beijing and Shanghai markets.”

Looking ahead, Wall Street projects that revenues for the full fiscal year ending March 31 will be $126.45 million, for a net income of $0.92 per share. That would represent a 130% year-over-year increase from net income of $0.40 per share in the previous fiscal year.

Savvy investors should keep in mind that Chindex has a history of outpacing analysts’ forecasts. During the most recent four quarters it has exceeded expectations by between 10% and 125%.

Taking advantage of the fact that the Chinese government allows for private providers of health-care services, the company opened its first hospital in 1997 in Beijing and expanded its health-care network by opening up a second hospital in Shanghai in 2004. It also has three clinics.

Chindex, which has over 700 employees across China, is planning to open two new facilities, one in the southern city of Guangzhou and the other in Beijing. The new private hospitals will be bigger than the existing two and will cater primarily to young, affluent families.

The company has completed a series of equity and debt financings that will provide it with $105 million in total financing and also has plans to participate in programs related to the summer Olympics, which are being held in Beijing.

On Jan. 23, Chindex announced that it has signed an agreement with NBC, which holds the tournament’s broadcast rights, to provide the broadcast network’s personnel with medical coverage during the games.

The health-care services division accounted for 45% of the company’s fiscal 2007 revenues, while the medical products division contributed the remaining 55%. Chindex distributes products to a number of hospitals throughout the country, generating consolidated revenues of $106 million in fiscal 2007, and has plans to expand its reach.

The company claims that it has delivered more than $40 million in medical equipment through U.S. government-supported financing plans since its founding in 1981. Additionally, it has partnered with German electronics giant Siemens AG to introduce color ultrasound imaging to the Chinese market.

Chindex’s direct sales, marketing and technical support personnel operate across China and Hong Kong to service medical equipment supplied to a customer base of over 2,000 hospitals.

It appears that the company stands ready to profit from China’s rapid growth and its increasingly affluent and health-conscious urban citizens.

Note: Chindex International Inc. (Nasdaq: CHDX) is on the “Watch List” of Rising Star Stocks, a subscription investment newsletter from Business Financial Publishing, which also publishes SmallCapInvestor.com. As a Watch List company, Chindex displays many characteristics found in successful stock winners, and is being closely monitored for possible inclusion in the Rising Star Stocks portfolio at a later date.

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