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Water Tower Research

Research from Water Tower Research

Water Tower Research is a leading equity research firm that provides research on micro, small and mid cap companies.

Water Tower Research was founded by Wall Street veterans after witnessing a fundamental shift in the investment research industry with the result being a declining knowledge base among investors, a lack of awareness and a shrinking pool of fundamental research being conducted on companies across the small-cap and micro-cap spectrum. The same issues are now increasingly occurring in the mid-cap space. This sea change within the investment community is impacting not only the companies themselves but also current shareholders and potential investors. With significantly less active sell-side sponsorship by Wall Street, a substantial information gap has developed between companies and various constituents in the financial community. The net result is fewer channels for insight and information to flow between companies and investors.

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<ul><li>Resilience in the face of macro headwinds. Persistently weak consumer sentiment (see Figure 1), combined with the impact of increased regulatory oversight in the healthcare system as the national government addresses corruption and Medicare fraud in pharmacies, have put both upstream and downstream partners in 111’s supply chain ecosystem under pressure.</li><li>According to a source cited by management, China’s retail pharmacy sector sales were down 2.2% Y/Y in the first nine months of 2024 (see Figure 2), with large chain pharmacies operating under financial pressure and independent pharmacies with their more limited resources coming under even greater pressure.</li><li>Despite these macro headwinds, 111’s revenue base has demonstrated some resilience. The revenue generated by its B2B platform dropped modestly by 1.2% Y/Y in 3Q24 and declined by less than 2% Y/Y in the first nine months of the year, a drop accentuated by the reported 3.7% Y/Y dip in 1Q24 due to an unfavorable comparison arising from the unexpected surge in sales in 1Q23 as a result of a resurgence in COVID infections.</li></ul>

Resilience in the face of macro headwinds. Persistently weak consumer sentiment (see Figure 1), combined with the impact of increased regulatory oversight in the healthcare system as the national government addresses corruption and Medicare fraud in pharmacies, have put both upstream and downstream partners in 111’s supply chain ecosystem under pressure.According to a source cited by management, China’s retail pharmacy sector sales were down 2.2% Y/Y in the first nine months of 2024 (see Figure 2), with large chain pharmacies operating under financial pressure and independent pharmacies with their more limited resources coming under even greater pressure.Despite these macro headwinds, 111’s revenue base has demonstrated some resilience. The revenue generated by its B2B platform dropped modestly by 1.2% Y/Y in 3Q24 and declined by less than 2% Y/Y in the first nine months of the year, a drop accentuated by the reported 3.7% Y/Y dip in 1Q24 due to an unfavorable comparison arising from the unexpected surge in sales in 1Q23 as a result of a resurgence in COVID infections.

111, Inc. - YI: Resilience Amid Short-Term Challenges

<ul><li>Two fulfillment centers added. In line with its goal to establish a national pharmaceutical logistics network (Kunpeng), 111 announced that it has added two new fulfillment centers.</li><li>This brings its network up from 11 to 13 centers across China. One of the new additions is in Guangzhou, Guangdong province in the South, with the other in Wuhan, in the central province of Hubei.</li><li>The two new centers expand the scale and capabilities of the company's existing fulfillment operations in each of those populous regions.</li></ul>

Two fulfillment centers added. In line with its goal to establish a national pharmaceutical logistics network (Kunpeng), 111 announced that it has added two new fulfillment centers.This brings its network up from 11 to 13 centers across China. One of the new additions is in Guangzhou, Guangdong province in the South, with the other in Wuhan, in the central province of Hubei.The two new centers expand the scale and capabilities of the company's existing fulfillment operations in each of those populous regions.

111, Inc. - Continuing to Build Up a Robust and Nimble Warehousing & Distribution Network

External reports (aggregated public sources), Value Investors Club

Value Investors Club

External reports (aggregated public sources)

Key points (machine generated)<ul><li>111 Inc's privatization process has been ongoing for 14 months, but no definitive agreement has been reached, leading to investor fatigue and a significant drop in stock price.</li><li>Chinese companies listed in the US typically have long privatization timelines, with some taking over 2 years to finalize the process.</li><li>The extended timeline in 111 Inc's case may be causing concern among investors, resulting in a wider spread between the offer price and the stock price, but relisting the company in China could potentially lead to a higher valuation.</li></ul>This article is sourced from an online content aggregator through publicly available sources and is displayed below for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

Key points (machine generated)111 Inc's privatization process has been ongoing for 14 months, but no definitive agreement has been reached, leading to investor fatigue and a significant drop in stock price.Chinese companies listed in the US typically have long privatization timelines, with some taking over 2 years to finalize the process.The extended timeline in 111 Inc's case may be causing concern among investors, resulting in a wider spread between the offer price and the stock price, but relisting the company in China could potentially lead to a higher valuation.This article is sourced from an online content aggregator through publicly available sources and is displayed below for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.

111 Inc -Adr (YI) - Thursday, Nov 2, 2023

Independent Research, Turtles all the way down

Turtles all the way down

Independent Research

Writing short articles about mis-priced boring stocks around the world.

<ul><li>Another quick trade idea. A continuation of the China theme (see my last post for more info).  Lufax holdings (LU). Again courtesy of JohnTill on Stocktwits.</li><li>A Chinese lending company, lending out directly and providing a peer to peer lending platform for the Chinese market.</li><li>With Ping An being a ~41% shareholder.</li></ul>

Another quick trade idea. A continuation of the China theme (see my last post for more info).  Lufax holdings (LU). Again courtesy of JohnTill on Stocktwits.A Chinese lending company, lending out directly and providing a peer to peer lending platform for the Chinese market.With Ping An being a ~41% shareholder.

<ul><li>First a new holding, Nameson Holdings (HKG:1982). A vertically integrated knitwear and fabrics manufacturer with most of its production base in Vietnam and some of it still in China.</li><li>They expanded to Myanmar, which did not work out so well, so they had to take significant write-downs and restructuring costs recently of 243 million HK$.</li><li>This somewhat obscures their true earnings power.</li></ul>

First a new holding, Nameson Holdings (HKG:1982). A vertically integrated knitwear and fabrics manufacturer with most of its production base in Vietnam and some of it still in China.They expanded to Myanmar, which did not work out so well, so they had to take significant write-downs and restructuring costs recently of 243 million HK$.This somewhat obscures their true earnings power.

China

111, Inc. operates as a digital and mobile healthcare platform. The Company offers pharmacy distribution, medical consultancy, e-prescription, and other services. 111 serves patients in China.

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111 Inc (YI US)

111, Inc. - YI: Resilience Amid Short-Term Challenges

Persistently weak consumer sentiment (see Figure 1), combined with the impact of increased regulatory oversight in the healthcare system

Water Tower Research

111, Inc. - Continuing to Build Up a Robust and Nimble Warehousing & Distribution Network

Two fulfillment centers added. In line with its goal to establish a national pharmaceutical logistics network (Kunpeng), 111 announced that it has...

Water Tower Research

111 Inc -Adr (YI) - Thursday, Nov 2, 2023

The ongoing privatization process for 111 Inc, a Chinese company listed in the US, has taken longer than usual, causing concerns among investors...

Value Investors Club

Quick Ideas #9

A Chinese lending company, lending out directly and providing a peer to peer lending platform for the Chinese market. With Ping An being a ~41%...

Turtles all the way down

Some Updates #2

First a new holding, Nameson Holdings (HKG:1982). A vertically integrated knitwear and fabrics manufacturer with most of its production base in...

Turtles all the way down

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