IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

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Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

China Traditional Chinese Medicine / Event-Driven

On Friday after market close, <a href="https://www.smartkarma.com/entities/china-traditional-chinese-medicine" target="_blank" data-smartkarma-citation="entities:351:1" rel="noopener">China Traditional Chinese Medicine (570 HK)</a>/CTCM announced that Sinopharm Hongkong, the controlling shareholder with a 32.46% stake, is currently exploring a proposal to privatise CTCM. The announcement was in response to <a href="https://www.reuters.com/article/us-sinopharm-m-a-china-tcm-exclusive-idUSKBN29W0J5" target="_blank" rel="noopener">a Reuters article</a> on 27 January that Sinopharm is leading a consortium to privatise CTCM. The rumoured privatisation price of HK$5.10 per share is a 26.6% premium to the unaffected price of HK$4.03 per share (26 January) and an 18.6% premium to the last close of HK$4.30 per share (27 January prior to the trading halt). <div class="content-highlight">We believe that the privatisation will be likely done through a scheme of arrangement. As a Hong Kong incorporated company, the key condition precedent is the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). Overall, we think that at the last close price, the downside risk is low (trading close to break price) with a good probability of upside (announcement of a formal proposal).  </div>

On Friday after market close, China Traditional Chinese Medicine (570 HK)/CTCM announced that Sinopharm Hongkong, the controlling shareholder with a 32.46% stake, is currently exploring a proposal to privatise CTCM. The announcement was in response to a Reuters article on 27 January that Sinopharm is leading a consortium to privatise CTCM. The rumoured privatisation price of HK$5.10 per share is a 26.6% premium to the unaffected price of HK$4.03 per share (26 January) and an 18.6% premium to the last close of HK$4.30 per share (27 January prior to the trading halt). We believe that the privatisation will be likely done through a scheme of arrangement. As a Hong Kong incorporated company, the key condition precedent is the scheme approved by at least 75% disinterested shareholders (&lt;10% disinterested shareholders rejection). Overall, we think that at the last close price, the downside risk is low (trading close to break price) with a good probability of upside (announcement of a formal proposal).  

China Traditional Chinese Medicine Possible Privatisation

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

China Shineway Pharmaceutical / Equity Bottom-Up

A year ago, I wrote about <a href="https://www.smartkarma.com/entities/6241" target="_blank" data-smartkarma-citation="entities:6241:1">China Shineway Pharmaceutical Group Ltd. (2877 HK)</a> that has a couple of low-cost drugs that sell in the second and third tier cities in China, limited only in Hebei Province for now but this is about to change. According to the management, the market for TCM granules is expected to be deregulated in the 3Q 2018 that sees the provincial player (currently is only allowed to sell within their home province) has the license to sell outside their home province. With strong sales staff and production capability, China Shineway is positioned to take advantage of the TCM granules deregulation. Burdened with stagnant sales growth over the past 5 years, the company can potentially turn into a growth story. In this report, we will discuss the following:<ol>
<li>Recent share price development</li>
<li>Q1 2018 update</li>
<li>Grassroots medical institution development in China</li>
<li>Update on China Shineway Pharmaceutical</li>
<li>Nationwide movement on TCM granules and Injection</li>
<li>Valuation</li>
</ol>

A year ago, I wrote about China Shineway Pharmaceutical Group Ltd. (2877 HK) that has a couple of low-cost drugs that sell in the second and third tier cities in China, limited only in Hebei Province for now but this is about to change. According to the management, the market for TCM granules is expected to be deregulated in the 3Q 2018 that sees the provincial player (currently is only allowed to sell within their home province) has the license to sell outside their home province. With strong sales staff and production capability, China Shineway is positioned to take advantage of the TCM granules deregulation. Burdened with stagnant sales growth over the past 5 years, the company can potentially turn into a growth story. In this report, we will discuss the following:
Recent share price development
Q1 2018 update
Grassroots medical institution development in China
Update on China Shineway Pharmaceutical
Nationwide movement on TCM granules and Injection
Valuation


China Shineway(2877: HK): Beneficiary from Deregulation of Non-Essential Drug in Grassroots Level

Doing bespoke work since 2002....., Custom Products Group

Patrick Hansen

Doing bespoke work since 2002.....

Custom Products Group

Custom Products was started 14 years ago at Lehman Brothers by current co-founder Patrick Hansen, CFA. After 3 years at Lehman, Patrick moved the team to Macquarie Securities where Simon Rigney (co-founder) joined. 3 years ago we took Custom Products independent. 

Our core strength can be summed up three words. 1- Customization - we have very little off the shelf products and most work is done on a one on one bespoke basis. 2- Speed - We pride ourselves in our ability to get requests back to the client very quickly. 3- Confidentiality - We do not redistribute. There is no grace period where we wait a week and then mass blast. Any request stops with that client.

Thematic (Sector/Industry)

We decided to to move away from Japan look at a different region, mainly because I got tired of Financials dominating all of my Value screens. However, when we started to screen for some cheap names in Hong Kong we found that Financials dominate as well.  Out of the 24 names that made the deep value screen, 16 names were in the Financial Sector.<h2>Screen Criteria</h2><ol>
<li>Hong Kong universe with mkt-cap above 500USD</li>
<li>Current PBR is below 1.3x</li>
<li>Current PBR is less than 20% above the 8-year PBR low</li>
<li>Current FY1…</li>
</ol>

We decided to to move away from Japan look at a different region, mainly because I got tired of Financials dominating all of my Value screens. However, when we started to screen for some cheap names in Hong Kong we found that Financials dominate as well.  Out of the 24 names that made the deep value screen, 16 names were in the Financial Sector.Screen Criteria
Hong Kong universe with mkt-cap above 500USD
Current PBR is below 1.3x
Current PBR is less than 20% above the 8-year PBR low
Current FY1…


Financials Also Very Cheap in Hong Kong / Deep Value Screen....

Shijiazhuang City production halt to reduce air pollution presents an opportunity to <a href="https://www.smartkarma.com/entities/6241" target="_blank" data-smartkarma-citation="entities:6241:1">China Shineway Pharmaceutical Group Ltd. (2877 HK)</a> as they have the most inventory ready for sale compared to their competitors. Their cash balance (50% of total assets) is also a cushion that the dividend payment will not be reduced/omitted and a war-chest to proceed with inorganic growth into biopharmaceutical companies that will increase their overall net margin.  The company is currently trading at ex-cash 4.91x PE with 3% dividend yield.

Shijiazhuang City production halt to reduce air pollution presents an opportunity to China Shineway Pharmaceutical Group Ltd. (2877 HK) as they have the most inventory ready for sale compared to their competitors. Their cash balance (50% of total assets) is also a cushion that the dividend payment will not be reduced/omitted and a war-chest to proceed with inorganic growth into biopharmaceutical companies that will increase their overall net margin.  The company is currently trading at ex-cash 4.91x PE with 3% dividend yield.   

The Only Company that May Benefit from Shijiazhuang Incident?

Founder, Riedel Research

David Riedel

Founder

Independent equity research on GEM Markets

Riedel Research

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We recently screened the HKG and China markets for ideas with below market P/E ratios and Dividend Yields above 2% that traded more than US$1 mn per day.  This screen netted 207 names.We then screened for which companies have corporate governance scores over 70/100 from the Riedel Research Corporate Governance Scoring system.The RRG Corporate Governance system scores Emerging Market companies on 12 different criteria to measure board independence, alignment of interest with shareholders…

We recently screened the HKG and China markets for ideas with below market P/E ratios and Dividend Yields above 2% that traded more than US$1 mn per day.  This screen netted 207 names.We then screened for which companies have corporate governance scores over 70/100 from the Riedel Research Corporate Governance Scoring system.The RRG Corporate Governance system scores Emerging Market companies on 12 different criteria to measure board independence, alignment of interest with shareholders…

Actionable Value Ideas with Solid Corporate Governance in China and Hong Kong

China

China Shineway Pharmaceutical (2877.HK) is the largest manufacturer of Chinese medicine injections, soft capsules, and granules in China.

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China Shineway Pharmaceutical (2877 HK)

China Traditional Chinese Medicine Possible Privatisation

Sinopharm Hongkong, the controlling shareholder, is currently exploring a privatisation proposal. At the last close price, the downside risk is low...

Arun George

China Shineway(2877: HK): Beneficiary from Deregulation of Non-Essential Drug in Grassroots Level

A year ago, I wrote about China Shineway Pharmaceutical Group Ltd. (2877 HK) that has a couple of low-cost drugs that sell in the second and third...

Henry Soediarko

Financials Also Very Cheap in Hong Kong / Deep Value Screen....

We decided to to move away from Japan look at a different region, mainly because I got tired of Financials dominating all of my Value screens....

Custom Products Group

The Only Company that May Benefit from Shijiazhuang Incident?

Shijiazhuang City production halt to reduce air pollution presents an opportunity to China Shineway Pharmaceutical Group Ltd. (2877 HK) as they...

Henry Soediarko

Actionable Value Ideas with Solid Corporate Governance in China and Hong Kong

We recently screened the HKG and China markets for ideas with below market P/E ratios and Dividend Yields above 2% that traded more than US$1 mn...

David Riedel

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