HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

Event-Driven

China Traditional Chinese Medicine / Event-Driven

<ul>
<li>Since “no dividend was proposed for the year ended 31 December 2023”, the privatization is highly likely to succeed. It may not be wise for investors to bet against privatization.</li>
<li>The recent high-level personnel changes in Taiji is “thought-provoking”, which seems to be preparing for the next step of integrating with China TCM. Spin-offs and integrations are expected within Taiji.</li>
<li>We analyzed possible playbook. In this way, CNPGC is able to solve the problem of horizontal competition. China TCM could also relist in A-share to gain higher valuations/better liquidity.</li>
</ul>


Since “no dividend was proposed for the year ended 31 December 2023”, the privatization is highly likely to succeed. It may not be wise for investors to bet against privatization.
The recent high-level personnel changes in Taiji is “thought-provoking”, which seems to be preparing for the next step of integrating with China TCM. Spin-offs and integrations are expected within Taiji.
We analyzed possible playbook. In this way, CNPGC is able to solve the problem of horizontal competition. China TCM could also relist in A-share to gain higher valuations/better liquidity.


China TCM (570.HK) - Latest Updates on Privatization and the Potential Merger with Taiji Group

<ul>
<li>Since China TCM doesn’t deny the rumors so far after the trading halt, privatization is becoming likely this time.Rumor said formal negotiations may not begin until after the Lantern Festival.</li>
<li>CNPGC may not want to pay high prices on privatization.Weak sentiment/share price may help with the negotiations.But the key is to obtain the consent of other shareholders, especially Ping An.</li>
<li>There’s underlying logic for Taiji Group to drive this privatization. A price of higher than HKD5.1 is possible. If the price could reach HKD6 (or higher), it has exceeded expectations.</li>
</ul>


Since China TCM doesn’t deny the rumors so far after the trading halt, privatization is becoming likely this time.Rumor said formal negotiations may not begin until after the Lantern Festival.
CNPGC may not want to pay high prices on privatization.Weak sentiment/share price may help with the negotiations.But the key is to obtain the consent of other shareholders, especially Ping An.
There’s underlying logic for Taiji Group to drive this privatization. A price of higher than HKD5.1 is possible. If the price could reach HKD6 (or higher), it has exceeded expectations.


China Traditional Chinese Medicine (570.HK) - New Information on Privatization

IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

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.

<ul>
<li>
<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> announced a privatisation offer from the Sinopharm-led consortium at HK$4.60 per share, a 47.4% premium to the undisturbed price.</li>
<li>The pre-condition relates to various Chinese regulatory approvals. As SOE entities own the offeror, regulatory approvals will be a formality. The offer price is final. </li>
<li>
<a href="https://www.smartkarma.com/entities/ping-an-insurance-grp-co-of-china-ltd" target="_blank" data-smartkarma-citation="entities:12880:1" rel="noopener">Ping An Insurance (H) (2318 HK)</a>, which holds a blocking stake, will be supportive. The offer is fair when the previously (higher) rumoured offers are adjusted for the market downturn. </li>
</ul>



China Traditional Chinese Medicine (570 HK) announced a privatisation offer from the Sinopharm-led consortium at HK$4.60 per share, a 47.4% premium to the undisturbed price.
The pre-condition relates to various Chinese regulatory approvals. As SOE entities own the offeror, regulatory approvals will be a formality. The offer price is final. 

Ping An Insurance (H) (2318 HK), which holds a blocking stake, will be supportive. The offer is fair when the previously (higher) rumoured offers are adjusted for the market downturn. 


China Traditional Chinese Medicine (570 HK): Sinopharm-Led Pre-Conditional Offer at HK$4.60

Pan-Asia Index Rebalances/ Events/ Delta One, Periscope Analytics

Brian Freitas

Pan-Asia Index Rebalances/ Events/ Delta One

Periscope Analytics

Periscope Analytics focuses on event-driven trades across Asia Pacific and provides comprehensive, timely and systematic coverage of index changes to major Asia Pacific indices in a structured manner.

The analysis includes forecasted inclusions and exclusions to all major Asian indices that have significant amount of tracking assets, including estimates of passive buy/sell flow on the stocks. The service also provides commentary and impact of market consultations, ground rule changes, and other events (IPOs, spin-offs, M&A) that could lead to index changes and passive flow.

Periscope Analytics works with multi-strategy hedge funds, proprietary trading firms, stat arb trading groups and long-only investors that invest and trade in the Asia Pacific region with the data being used to trade index rebalances, avoid pre-positioning and passive flow, and to time entry into and exit from stocks.

Event-Driven Trades Across Asia Pacific

Western Superconducting Techno / Event-Driven

<ul>
<li>Over 85% of the way through the review period for the December rebalance of the <a href="https://www.smartkarma.com/entities/csi-smallcap-500-index-shang" target="_blank" data-smartkarma-citation="entities:35347:1" rel="noopener">CSI500 Index</a>, we forecast 50 changes (the maximum permitted) at the close on 8 December.</li>
<li>There is a big sector skew in the potential changes. We estimate a one-way turnover of 9.4% at the December rebalance resulting in a one-way trade of CNY 7.22bn.</li>
<li>With the market being stabilised through the ETF route, the index constituents have outperformed the non-index constituents over the last 6-7 weeks. That could reverse over the near term.</li>
</ul>


Over 85% of the way through the review period for the December rebalance of the CSI500 Index, we forecast 50 changes (the maximum permitted) at the close on 8 December.
There is a big sector skew in the potential changes. We estimate a one-way turnover of 9.4% at the December rebalance resulting in a one-way trade of CNY 7.22bn.
With the market being stabilised through the ETF route, the index constituents have outperformed the non-index constituents over the last 6-7 weeks. That could reverse over the near term.


CSI500 Index Rebalance Preview: ETF Inflows Lead to Performance Skew

Equity Bottom-Up

<ul>
<li>The rally of TCM companies has probably come to an end. But we think there would be good trading opportunities in 23Q4. Things could become challenging again in 24Q1.</li>
<li>If P/E is used when calculating the valuation of innovative pharmaceutical companies, unreasonable situations may arise. Sales profit rather than net profit could be a better choice for P/E.</li>
<li>Although iRay’s current P/E has fallen in reasonable range, due to concerns about its long-term growth prospects, valuation could further decline in long term. So, just short-term trade is recommended.</li>
</ul>


The rally of TCM companies has probably come to an end. But we think there would be good trading opportunities in 23Q4. Things could become challenging again in 24Q1.
If P/E is used when calculating the valuation of innovative pharmaceutical companies, unreasonable situations may arise. Sales profit rather than net profit could be a better choice for P/E.
Although iRay’s current P/E has fallen in reasonable range, due to concerns about its long-term growth prospects, valuation could further decline in long term. So, just short-term trade is recommended.


China Healthcare Weekly (Aug.4) - TCM Rally Ends, P/E Ratio Becomes Ineffective, IRay Technology

China

Chongqing Taiji Industry (Group) Co., Ltd. manufactures and markets medicines, healthcare products, medical packing products, and medical instruments.  The Company also imports and exports Chinese medicine materials and medical packing materials.

Chongqing Taiji Industry (Group) A (600129 CH)

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Chongqing Taiji Industry (Group) A (600129 CH)

China TCM (570.HK) - Latest Updates on Privatization and the Potential Merger with Taiji Group

The privatization is highly likely to succeed. It's not wise for investors to bet against privatization.Taiji's high-level personnel changes...

Xinyao (Criss) Wang

China Traditional Chinese Medicine (570.HK) - New Information on Privatization

The price of HK$4.6 is below many people's expectation. In the context of the need for substantial implementation of SOE integration in 2024, Ping...

Xinyao (Criss) Wang

China Traditional Chinese Medicine (570 HK): Sinopharm-Led Pre-Conditional Offer at HK$4.60

The offer is attractive to historical trading ranges and peer multiples. Ping An, which holds a blocking stake, will be supportive. This looks like...

Arun George

CSI500 Index Rebalance Preview: ETF Inflows Lead to Performance Skew

There should be 50 changes in Dec with a big sector skew. Turnover is ~10% and 31 stocks will have 1x ADV to trade. Huge ETF inflows have led to...

Brian Freitas

China Healthcare Weekly (Aug.4) - TCM Rally Ends, P/E Ratio Becomes Ineffective, IRay Technology

Rally of TCM sector has probably ended. Traditional P/E ratio becomes ineffective sometimes. iRay’s current valuation is comfortable for trades,...

Xinyao (Criss) Wang

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