Ladies and gentlemen, thank you for standing by, and welcome to the Q4 2013 Concord Medical Services Holdings Limited Earning Conference Call. At this time, all participants are in a listen-only mode. There will be a presentation followed by question-and-answer session. (Operator Instructions) I must advise you that this conference is being recorded today, Tuesday, 1 of April, 2014. I'll now like to hand the conference over to your speaker today, Mr. Ting Jia, IR Manager at Concord Medical. Thank you, sir, and please go ahead.

Hello everyone, and welcome to Concord Medical's 2013 fourth quarter and full year earning conference call. Concord Medical's earnings release was distributed earlier today and you can find a copy on our website as well as on newswire services. Today you will hear from Dr. Jianyu Yang, Concord Medical’s Chairman and Chief Executive Officer; and Mr. Adam Sun, Chief Financial Officer. After their prepared remarks, Dr. Yang and Mr. Sun will be available to answer your questions. Before we continue, please note that the discussion today will contain forward-looking statements made under the Safe Harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995 and within the meaning of Section 21E of the Securities Exchange Act of 1934 as amended. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from our current expectations. Potential risks and uncertainties include but are not limited to those outlined in our public filings with the SEC. Concord Medical does not undertake any obligation to update any forward-looking statement except as required under applicable law. Both our earnings release and remarks made during this call include discussions of certain unaudited non-GAAP financial measures. Our earnings release contains a reconciliation of the unaudited non-GAAP measures to the most directly comparable unaudited GAAP measures. As a reminder, this conference is being g recorded. In addition, a webcast of this conference call will also be available on Concord Medical’s website. I will now turn the call over to Concord Medical’s Chairman and CEO, Dr. Jianyu Yang.

[Foreign Language] Ladies and gentlemen, welcome to Concord Medical's 2013 fourth quarter and full year earnings conference call. [Foreign Language] We are pleased with our notable achievements in both our network business and the hospital business in 2013. Total full year revenue reached RMB975 million, US$161 million, representing an increase of 47.1% over 2012. Full year revenue from our diagnostic and imaging centers increased to 19.8% to RMB557 million, US$92 million, while revenues from our hospital segment reached RMB418 million, US$69 million. With 144 cancer diagnosis and a radiotherapy centers and one private general hospital, Concord Medical has become a leading provider of important healthcare services in China. [Foreign Language] Over the last year, Concord Medical continued to implement its developmental strategy, which resulted in several important achievements. In November, we signed an MOU with GE Healthcare with Shanghai New Hongqiao International Medical Center to build China's first independent high-end medical imaging diagnostic center located within the New Hongqiao Medical Center. Further, Guangzhou Concord Cancer Hospital have achieved a major breakthrough in 2013 and will begin construction in 2014. At the same time, we are building Shanghai Concord Cancer Hospital simultaneously. When completed, they will become core components in our nationwide treatment and work and will play important roles in academic research, personnel training, the provision of telemedicine and many other core functions. Meanwhile, Concord prepares to transform a chronic cancer treatment and diagnostic centers if the market conditions allow gradually into the independent radiotherapy and imaging centers and make them become an important part of the national cancer hospital network. [Foreign Language] Based on China's cancer treatment and research data and our impact and [appending] (ph) of the industry, we found that the chronic cancer treatment service is provided mainly by the public hospitals in a rudimentary way. Currently we believe China has no qualified medical institutions that can provide a differentiated international-friendly caner treatment services. Constructing a select number of high-end cancer hospitals to meet rising -- to meet rising patient demand is a major priority for Concord Medical. With the national policy to encourage private medical institutions, we finally got a best alternative to achieve this idea. After the completion of Guangzhou and Shanghai Concord cancer hospitals, they will be the hub of nationwide network of treatment Concord planned. We will cooperate with the international renowned world-class medical institutions to provide multi-disciplinary cancer treatment in equating with international level to provide many Chinese cancer patients with a high level treatment and diagnostic services. [Foreign Language] The establishment of an independent radiotherapy center is an important part of the Concord Medical's business development. We will do careful analysis and judgment focusing on the national market. According to the situation of the contract expiration of existing centers, we will be in preparation for the establishment of three to five independent radiotherapy centers in 2013 with the investment of approximate RMB30 million for each center. In this way, we can gradually convert the original centers collaborating with public hospitals to independent radiotherapy centers. The network will provide a basis for radiotherapy cancer treatment services and apply to join the local Medicare reimbursement eligibility. So far, we have communicated with the health authorities in a number of pilot areas and have received the feedbacks very positively. So we will promote this work as a focus in 2014. [Foreign Language] In 2013 we further explored and invested in telemedicine and other new business and have accumulated a wealth of experience. We will further strengthen the investment in new business because we believe that the new business is in line with the trend of market development having very good complement and synergy for the existing business. In 2014 we will pay special attention to telemedicine medical services, because not only the business has the part of a good foundation and offline resources, but also the healthcare reform policies focus on primary healthcare resources. This business will have a good social effect. [Foreign Language] Concord and MD Anderson have established a close multifaceted working relationship. We have invested in MD Anderson's Proton Center and received encouraging returns; not only on the financial level, but more importantly, we had the privilege to observe up-close and getting extremely valuable learning experience from one of the world's most advanced cancer hospitals. MD Anderson's treatment facilities, technology, medical staff configuration, multi-disciplinary caner treatment among others are highly beneficial to Concord Medical as we implement tough methods to service future Chinese cancer patients we may treat. We are also investing in a radiotherapy automation solution company founded my American scientists, called Global Oncology One and through this relationship we hope to introduce the most advanced radiotherapy oncology treatment plants to China. [Foreign Language] Since 2013 the Chinese government issued a series of healthcare reform policy to encourage private capital to enter the healthcare industry, which will have an impact that is catalyst effect on the existing system of public ownership. Many of these policies, such as clear approval procedures of private medical institutions and large medical device license for private institutions, encourage multi-site practice for doctors and so on. It is very favourable for Concord Medical's plan to establish an independent cancer hospital. We will take full advantage of policy opportunities and accelerate the implementation of our business development strategy. [Foreign Language] According to our strategic development plan, in the next three to six years, we will form the initial nationwide hospital network of caner treatment and diagnosis and a clear positioning of products and services of high-end and secondary hospitals in the networks to secure the hospital's construction progress. We will upgrade the management mode of the hospitals anatomy and build Concord as the first brand of cancer treatment in China. [Foreign Language] Finally, I want to once again thank the majority of the capital markets and foreign investors for supporting and caring the Chinese healthcare industry and Concord Medical. We welcome everyone to communicate with us and to provide us with the development of information and the latest trends of the industrial development and the domestic and international markets. Thank you. [Foreign Language] At this point, I would like to turn the call over to our CFO, Mr. Adam Sun to review our financial results for the fourth quarter and full year of 2013.

Thanks, Dr. Yang. Welcome everyone. First of all, I would like to go through the highlights of our full year financial results. Total net revenues for the full year 2013 were RMB975 million, $165 million, a 47% increase on 2012. Gross profit for the full year 2013 was RMB388 million or $64 million, a 19% increase on 2012. Gross profit margin for the fourth quarter was 43.6% and for the full year 2013 was 39.8%. Adjusted EBITDA was RMB397 million or $66 million, a 5.7% increase from 2012. Net income for the full year was RMB94 million or $16 million. Our effective tax rate for the fourth quarter was 72% as partially due to RMB14.6 million in this holding tax expenses related to special dividend declared on January 7. Both basic and diluted earnings per ADS for the full year were RMB1.96 or $0.32. The number of treatment and diagnostic patient cases was 33,000 and 317,000 for the full year, representing a 12% decrease and 33% increase on 2012 respectively. The revenue breakdown between treatment and diagnostic centers is 58% and 42% respectively. I would like to focus my discussion on the following issues. First, I would like to talk about the status of our network business, which contributed RMB168 million in revenue during the quarter and RMB557 million for the full year, 57% of total net revenue. The gross margin for our network business was 65.7% in the fourth quarter, compared to 55.4%, 59.7% and 56% during the first three quarters of 2013. Besides strong gross margin in the fourth quarter, the network business is also showing strong growth momentum as well as the year-over-year growth in the fourth quarter was 57%, very strong quarterly growth. While there is seasonality factors as fourth quarter is historically strong, our network business growth can be contributed to the following factors mainly; strong business performance by our new centers, especially the large centers opened during 2013, centers opened less than a year contributed approximately 13% of total revenue in 2013, larger than our historical average of around 10%; general improvement in hospital traffic and strong growth in our diagnostic centers, which is demonstrating 33% year-over-year growth in the fourth quarter. As for our hospital business, China hospital treated 151,000 outpatients and around 8,000 inpatients for the fourth quarter of 2013. The average bed utilization rate for the fourth quarter of 2013 was 96.1%. The average days of hospital stay was 9.9 days per patient for the fourth quarter. China hospital operated 1,015 beds as of December 31. For the full year China's outpatient number was 545,000 and inpatient number was 30,000. Outpatient, inpatient and pharmacy revenue accounted for 23%, 33% and 43% of total revenue respectively. The pharmacy sales is still relatively high as it is a challenging work to transform China hospital into a general hospital with strong specialty in oncology. Also, I would like to draw your attention to our improved DSO or days sales outstanding. In 2013, we have strengthened our collection efforts and have incorporated DSO as a key performance indicator, KPI in our review process for our centers. Now the full year DSO from the network business stands at 145 days, and the fourth quarter DSO was 137 days. As for the China hospital, the full year DSO was 37 days. We will keep working on improving our receivable levels in 2014. We always pay close attention to our cash flow situation based on the adjusted EBITDA number. Our full year adjusted EBITDA in 2013 was RMB397 million or $65 million, a 6% increase from 2012. Our EBITDA margin is 41%. Both our network and hospital business are demonstrating strong cash generating capability. We expect that the full year 2014 EBITDA will be up approximately RMB570 million, an increase of around 15% over 2013. Last, I would like to discuss our 2014 financial guidance. You may have noticed that we issued the 2014 full year earnings per ADS guidance. We believe that by providing earning guidance it would add more visibility to our earnings as well as helpful for investors to understand the growth prospect of our business. For the full year of 2014, the company expects earnings in the range of $0.45 to $0.50 per ADS or $20.3 million to $22.5 million in net income attributable to ordinary shareholders representing an increase of 25% to 38% year-over-year. This focus reflects Concord Medical's current and the preliminary view which is subject to change. Finally, the company is targeting to start construction of Guangzhou Concord Cancer Hospital in 2014. To summarize, we will keep strengthening our core business and build up the foundation for our nationwide network of cancer hospitals in 2014. It will be a very productive and fruitful year for Concord Medical. Thanks again for your attention. Now, we will like to open up to questions. Operator please.

Thank you, sir. Ladies and gentlemen we will now begin the question-and-answer session. (Operator instructions) Your first question comes from the line of Isabella Zhao from Morgan Stanley. Please ask your question.

Thank you for taking my question. [Foreign Language] I will transform that question into English. I have two questions. The first one is regarding for the guidance for the growth for network on hospital in 2014. And the second question is for Mr. Yang and how do you think about the investment trend for the hospital. We all now think that the late 2013, the government policy for private capital into the hospital or so, a lot of people are chasing the deals, so what kind of strategy we have facing the increase competitive landscape? Thank you.

Thank you, Isabella. Let me answer your first question and then I'll turn over to the CEO. As for the guidance, as you know that we for the first time, we issued earnings guidance for 2013, because we believe that the how forward to the general market to understand our business prospect as well as our earning capability. And so as for the revenue side, and in general, we believe that both our network and hospital business will demonstrate steady growth. So far, we expect that the revenue will grow from probably in the lower to mid teen level and as we go deeper into the year, I think we may adjust our focus and expectations. So generally, our earnings guidance is based upon the assumption that our revenue from the network and hospital's business will grow in the lower teen level.

Thank you.

Hope that's helpful for you. And now I turn over to Dr. Yang.

[Foreign Language] So, first question I had great aspects to answer that. [Foreign Language] From micro-economy nation-wide. [Foreign Language] Chinese healthcare reform is necessary right now so far and is getting to the situation and having strong demand pushing the regulation to forward. [Foreign Language] So, we're pleased to see many policies by the government to push and improve the private investment to the related industry. [Foreign Language] In these good environment, and we're benefactor. [Foreign Language] Second, we're -- Concord Medical are focusing on cancer diagnostics and radio therapy. [Foreign Language] As I said, we're building our high-end cancer hospitals in Shanghai, Beijing, and Guangzhou and core hospital in our network. And also at the same time, we're building our secondary level cancer hospitals based on our current network centers focusing on radiotherapy. [Foreign Language] Since 2013, in these two aspects, because of the release of the regulation from the government, we're pushing ourselves further more than before. [Foreign Language] For our own strategy, we will be focusing on -- to build our own new hospital and our own new centers. [Foreign Language] Because of the high value of cancer treatment, we don't see many competitors in the market for us. [Foreign Language] By the past of 17 years of operation history, we have very rich and strong personnel, technology to support us. [Foreign Language] We're confident to transform our many years' experience on the technology to our diagnosis and radio therapy centers. [Foreign Language] We're now doing -- and we're doing not only for radio therapy but also including surgery and chemotherapy in our Guangzhou and Shanghai cancer hospitals. [Foreign Language] For this we want to collaborate with American most advanced technology and to get the partnership. [Foreign Language] As you'll see, we are starting to collaborate with MD Anderson for technology and operation and is getting deeper and deeper. [Foreign Language] Therefore, we're very confident for three new hospitals in Beijing, Shanghai, and Guangzhou. [Foreign Language] Thank you, Isabella.

[Foreign Language]

[Foreign Language] Since 2010, it took three years all the way to the end of 2013. We got all applications approved completely. [Foreign Language] We can now imagine, so far, we got all of our applications completed and the project will start construct in 2014. [Foreign Language] The hospital will be open in the mid of 2017. [Foreign Language] Before this, we will open radio therapy business first. [Foreign Language] Our announcements, we're expecting to build a hospital in Beijing International Medical Center and we’re going to be the first hospital in this center. Right now the government is doing their job which is the process and I think 2015, we will -- government will be prepared for the whole infrastructure, such as land or anything else. [Foreign Language] Right now there is no overall planning from the government. So, we just sign a agreement without any detailed plan. [Foreign Language] For Guangzhou project, we're prepared to start construction and the total investment will be RMB600 million and RMB700 million. [Foreign Language] So, for Guangzhou project, we prepared last year and right now we're waiting for the offer from the government and that project we can make detailed plan for this project. [Foreign Language] We hope you can see this answer written. [Foreign Language] Thank you, Isabella. Operator?

Yes sir. Your next question comes from the line of Sean Wu from JPMorgan. Please ask your question.

Hello yes, thank you Yang, Adam for taking this question. Congratulations on the nice growth in the fourth quarter. I have some questions surrounding the spectacular growth in the fourth quarter. It grew 40% and Adam mentioned that something about incentive, can we get some idea like how many centers overall you added in 2013? Where are they located and how come, like they are so much more profitable than others? Also you have improved the gross margin in the fourth quarter, should we expect to improve the margin will carry over to next year. Let me just translate my questions here. [Foreign Language]

All right. Thank you, Sean. So, as I discussed during my prepared remarks, we're seeing a lot of positive factors contributing to our revenue growth in the fourth quarter and for the full year. One of the important factors is contribution from the new centers. And in 2014, I don't have the exact numbers here because we announced new center quarter-by-quarter. I remember we added approximately eight to nine centers during the year. And these located some in the -- most of them I remember located within the cities and areas where we have existing centers, which the new added centers and the existing centers demonstrating very good synergy and cost refer our patients between the centers. As for the overall gross margin for the network in the -- for the fourth quarter, which is 65.7% which is the highest among the -- all the four quarters during the year. And we believe that part of that is -- can be contributed to the seasonality factors. As you see that as we spend on the promotion of the business during the year and at the end of the year, the management team of these centers will strengthen and basically the result of the previous promotional and sales work. In general, we're very happy with growth prospect as well as margin our situation of our centers. And for the full year, we believe that the gross margin will stay at all around the same level of 2013 and they may show some sequential improvement. And also I want to talk a little bit about the China hospital. And you may notice that while our revenue has shown strong growth year-over-year, which means our network is showing a 57% year-over-year growth in fourth quarter and the hospital is showing 8% year-over-year growth in the fourth quarter. However, you may notice that China hospital's gross margin is low, both sequentially and year-over-year. Fourth quarter gross margin for China hospital is around 10%. The main reason for that is due to the product mix or service mix between in-patient, outpatient and summer fees. In fact, in the fourth quarter, our in-patient revenue -- our in-patient revenue for the entire hospital is showing a slight decline and which shows that it is -- as you know our strategic goal is to gradually transform entire hospital into a general hospital with a strong specialty and focus in oncology and also we have engaged Fox Chase in 2013 under the experts under the Fox Chase centers visiting China Hospital regularly. But it is still showing the challenge of doing this transformation because we're seeing somewhat more competition of what they expected not only from the other third tier hospitals in tier, but also from the some of the surrounding secondary hospitals in the area as well. The per patient yield I showing a growth, but not as fast as we expected. So, in 2014, we will strong -- our work will focus mainly on first to keep the strong growth momentum for the network and secondly, to keep working the management team of China hospital to build out its -- to strengthen its oncology department, which will be -- these two will be the core tasks for us in 2014. Thank you.

Good. Thank you.

Thank you. (Operator instructions) There are no further questions at this time. I will now like to hand the conference back to today's presenter. Please continue.

Once again, thank you for joining us today. Please don't hesitate to contact us if you have any further questions. Thank you for your continued support. Operator?

Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may all disconnect.