HK/China Equity Long-Short

Osbert Tang, CFA

Quantitative Analysis

<ul>
<li>YTD, our "Buy the Worst" strategy has underperformed the HSI by a marginal 2pp. The portfolio has a significant rebound against the Index starting mid-Jun. </li>
<li>
<a href="https://www.smartkarma.com/entities/sands-china-ltd" target="_blank" data-smartkarma-citation="entities:182:1" rel="noopener">Sands China Ltd (1928 HK)</a> is the best-performing one while <a href="https://www.smartkarma.com/entities/xiaomi-corp" target="_blank" data-smartkarma-citation="entities:24409:1" rel="noopener">Xiaomi Corp (1810 HK)</a> is the worst. We see room for the portfolio to catch up in 2H22.</li>
<li>The long-term performance of the strategy stays very solid. On a 5-year basis, "Buy the Worst" strategy has outperformed the HSI by an immense 30.9pp. </li>
</ul>


YTD, our "Buy the Worst" strategy has underperformed the HSI by a marginal 2pp. The portfolio has a significant rebound against the Index starting mid-Jun. 

Sands China Ltd (1928 HK) is the best-performing one while Xiaomi Corp (1810 HK) is the worst. We see room for the portfolio to catch up in 2H22.
The long-term performance of the strategy stays very solid. On a 5-year basis, "Buy the Worst" strategy has outperformed the HSI by an immense 30.9pp. 


A Mid-Year Review of Our “Buy the Worst” Strategy 2022: In Tandem with the HSI

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Equity Bottom-Up

Alibaba Health Information Tec / Equity Bottom-Up

<ul>
<li>Alibaba Health’s core pharmaceutical direct sales business is facing challenges in terms of increasing competition as well as lower revenue growth and margins, dragging down the overall performance.</li>
<li>The recent new policies about online drug sales on third-party digital healthcare platforms and online diagnosis and treatment would add more uncertainties on Alibaba Health’s business and outlook.</li>
<li>If such unfavorable trend continues, the gap between Alibaba Health and JD Health would be wider. It’s not easy to break the deadlock. Investors may need to take heed.</li>
</ul>


Alibaba Health’s core pharmaceutical direct sales business is facing challenges in terms of increasing competition as well as lower revenue growth and margins, dragging down the overall performance.
The recent new policies about online drug sales on third-party digital healthcare platforms and online diagnosis and treatment would add more uncertainties on Alibaba Health’s business and outlook.
If such unfavorable trend continues, the gap between Alibaba Health and JD Health would be wider. It’s not easy to break the deadlock. Investors may need to take heed.


Alibaba Health Information Technology (241.HK) - It’s Not Easy to Break a Deadlock

<ul>
<li>Through perfect partnership system, Gushengtang locks in the scarce TCM physicians, and then quickly establishes/merges offline medical institutions to occupy the market. Such development mode works well so far.</li>
<li>The challenges are the risks of losing talents to competitors and the weak sales of healthcare products leading to lower profitability. </li>
<li>Gushengtang is in an industry that receives government encouragement/preferential policies. The 2022 revenue growth forecast could fall back to about 25% considering the pandemic/lockdown. The EPS could narrowly turn positive.</li>
</ul>


Through perfect partnership system, Gushengtang locks in the scarce TCM physicians, and then quickly establishes/merges offline medical institutions to occupy the market. Such development mode works well so far.
The challenges are the risks of losing talents to competitors and the weak sales of healthcare products leading to lower profitability. 
Gushengtang is in an industry that receives government encouragement/preferential policies. The 2022 revenue growth forecast could fall back to about 25% considering the pandemic/lockdown. The EPS could narrowly turn positive.


Gushengtang (2273.HK) - The Development Momentum Is Good, but There Are Also Challenges

Equity Analyst, LightStream Research

Shifara Samsudeen, ACMA, CGMA

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

JD Health International  / Equity Bottom-Up

<ul>
<li>China has released a draft rule on 22nd June that would prevent third-party e-commerce platforms from selling drugs directly to consumers online.</li>
<li>Alibaba Health as well as JD Health’s shares dropped 15% at the end of trade on 22nd June while Ping An Health's shares lost about 5.7% of its value.</li>
<li>This is the <strong>First</strong> of a series of reports where we analyse the impact of the above draft rule on leading digital-healthcare players in China. This report discusses JD Health.</li>
</ul>


China has released a draft rule on 22nd June that would prevent third-party e-commerce platforms from selling drugs directly to consumers online.
Alibaba Health as well as JD Health’s shares dropped 15% at the end of trade on 22nd June while Ping An Health's shares lost about 5.7% of its value.
This is the First of a series of reports where we analyse the impact of the above draft rule on leading digital-healthcare players in China. This report discusses JD Health.


JD Health: Minimal Impact from New Policy on Digital Healthcare

Ping An Healthcare and Technol / Equity Bottom-Up

<ul>
<li>Just as we analyzed before, things get worse for PAGD. The loss expanded and gross margin declined. The gap between PAGD and its peers (JD Health, Alibaba Health) is widening. </li>
<li>PAGD’s Achilles' heel is its business model/profit model is untenable. The new HMO services system would not help turn things around because China's national condition is different from the US.</li>
<li>Being on the wrong track, PAGD’s financial performance is expected to further weaken. We are conservative about PAGD’s outlook. Any brief upwards movement is just dead cat bounce.</li>
</ul>


Just as we analyzed before, things get worse for PAGD. The loss expanded and gross margin declined. The gap between PAGD and its peers (JD Health, Alibaba Health) is widening. 
PAGD’s Achilles' heel is its business model/profit model is untenable. The new HMO services system would not help turn things around because China's national condition is different from the US.
Being on the wrong track, PAGD’s financial performance is expected to further weaken. We are conservative about PAGD’s outlook. Any brief upwards movement is just dead cat bounce.


Ping An Healthcare and Technology (1833.HK) - Untenable Business Model Worsen the Logic and Outlook

China

Alibaba Health Information Technology Limited is an integrated healthcare information and content service provider. The Company uses product identification, authentication, and tracking system data for its healthcare information.

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Alibaba Health Information Tec (241 HK)

A Mid-Year Review of Our “Buy the Worst” Strategy 2022: In Tandem with the HSI

While "Buy the Worst" strategy only performed in line with the HSI YTD, there is potential for the portfolio to catch up in 2H22. Meanwhile, "Buy...

Osbert Tang, CFA

Alibaba Health Information Technology (241.HK) - It’s Not Easy to Break a Deadlock

Alibaba Health is facing challenges in both business and policy sides,with declining performance.The gap with JD Health becomes wider.It’s not easy...

Xinyao (Criss) Wang

Gushengtang (2273.HK) - The Development Momentum Is Good, but There Are Also Challenges

Gushengtang's business model works well, but increasing competition and weak healthcare product sales could negatively affect performance. 2022...

Xinyao (Criss) Wang

JD Health: Minimal Impact from New Policy on Digital Healthcare

This is the First of a series of reports where we analyse the impact of the above draft rule on leading digital-healthcare players in China. We...

Shifara Samsudeen, ACMA, CGMA

Ping An Healthcare and Technology (1833.HK) - Untenable Business Model Worsen the Logic and Outlook

PAGD’s Achilles' heel is its business/profit model is untenable.The new HMO services will not turn things around.PAGD will enter a vicious circle...

Xinyao (Criss) Wang

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