G Medical Innovations (ASX: GMV) – Separate listing for Chinese JV

Article written by Pitt Street Research. For the full report click here

G Medical Innovations Holdings Limited (ASX:GMV) is commercializing mobile vital signs monitoring systems that enable remote monitoring of patients. GMV’s products haveto potential to substantially lower healthcare costs and to improve patients’ overall wellness and mobility.

G Medical Innovations Holdings Ltd (ASX:GMV) announced it will be seeking a listing for its Chinese Joint Venture (JV) in which it currently holds 70% of the shares through its Hong Kong subsidiary. GMV has retained the Hong Kong branch of Singapore-based United Overseas Bank Limited (UOB) to facilitate the listing of Guangzhou Yimei Innovative Medical Science and Technology Co Ltd. (GYIMSTC), expected in the next six to nine months. GMV will seek additional syndication support for the listing from banks in India and China and will retain at least 50% of the shares in GYIMSTC. GMV’s JV partner will sell down its stake in GYIMSTC pari passu.

GMV will seek a minimum market capitalization for GYIMSTC of US$ 200M, one of the requirements of the Hong Kong Stock Exchange for new High Tech and Life Sciences listings. We believe the keyunderlying factors of that valuation are GYIMSTC’s future productioncapabilities for the Prizma Medical smartphone case and the G Medical Patch, as well as distribution rights for both products in China.

Chinese JV pivotal for GMV manufacturing ramp up

GYIMSTC is GMV’s central hub when it comes to future large-scale manufacturing of the Prizma Medical smartphone case and the G Medical Patch. The company is currently awaiting the final inspection of its Chinese facilities by the CFDA. Once certification is completed, GMV will be able to start up commercial, large-scale, production of both products and fulfill the contracts it has won globally in the last 12 months. The company is currently manufacturing these two products in Israel, but only in small volumes.

GYIMSTC will also be handling distribution of the Prizma and the Patch in the vast Chinese market. CFDA approval of both products is required before GYIMSTC can commence with this distribution. It will be obvious that CFDA approval for GYIMSTC’s manufacturing facilities and the two main products will be pivotal for GMV’s global ramp up plans and hencethe company’s valuation.

Further upside potential following pending CFDA approval

As the ~ 47% GMV share price jump on the day of the announcement illustrated, the market has been in a wait-and-see mode with respect to GMV’s valuation. Depending on the amount of fresh capital raised through the GYIMSTC listing, GMV may not need to raise capital through its ASX listing to ramp up manufacturing. Furthermore, if and when CFDA approval is received, we expect additional shareholder value to be unlocked. Which is why we reiterate our Speculative Buy rating for GMV.

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Pitt Street Research work is commissioned by the listed companies it covers, and Pitt Street Research has received or will receive payment for the preparation of such work. Please refer to the bottom of the research notes as published on Pitt Street Research’s web site for risks related to the companies being covered, as well our General Advice Warning, disclaimer and full disclosures. Also, please be aware that the investment opinion in this report is current as at the date of publication but that the circumstances of the company may change over time, which may in turn affect our investment opinion.

G Medical Innovations (ASX:GMV) – The strong pulse of mHealth

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