Asian Hedge Fund Manager, Long Short Equity, Macro

David Mudd

Cross Asset Strategy

<ul>
<li>Wide dispersion of returns has meant that industry sector investing  was a major performance contributor in Hong Kong</li>
<li>
<a href="https://www.smartkarma.com/entities/lygend-resources-technology" target="_blank" data-smartkarma-citation="entities:36493:1" rel="noopener">Lygend Resources &amp; Technology (2245 HK)</a> brokeout after Indonesia announced a moratorium on new nickel mining permits.  <a href="https://www.smartkarma.com/entities/sino-biopharmaceutical" target="_blank" data-smartkarma-citation="entities:230:1" rel="noopener">Sino Biopharmaceutical (1177 HK)</a> broke its falling wedge pattern after announcing results.
</li>
<li>
<a href="https://www.smartkarma.com/entities/wynn-macau-ltd" target="_blank" data-smartkarma-citation="entities:473:1" rel="noopener">Wynn Macau Ltd (1128 HK)</a> broke to a new low after announcing a disappointing 2Q EBITDA.  The sector is also affected by a crackdown on illegal money exchange operations.
</li>
</ul>


Wide dispersion of returns has meant that industry sector investing  was a major performance contributor in Hong Kong

Lygend Resources &amp; Technology (2245 HK) brokeout after Indonesia announced a moratorium on new nickel mining permits.  Sino Biopharmaceutical (1177 HK) broke its falling wedge pattern after announcing results.


Wynn Macau Ltd (1128 HK) broke to a new low after announcing a disappointing 2Q EBITDA.  The sector is also affected by a crackdown on illegal money exchange operations.



Technically Speaking, Breakouts and Breakdowns: HONG KONG (AUGUST 15)

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.

Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/sciclone-pharmaceuticals-holdings-limited" target="_blank" data-smartkarma-citation="entities:17351:1" rel="noopener">Sciclone Pharmaceuticals (6600 HK)</a>'s scheme document is out, and the court meeting is scheduled for 19 June. The IFA considers the HK$18.80 per share offer fair and reasonable. </li>
<li>The key condition is approval by at least 75% of disinterested shareholders (&lt;10% of all disinterested shareholders rejection). No independent shareholder holds a blocking stake.</li>
<li>This is a done deal. At the last close and for the 12 July payment, the gross and annualised spread is 2.2% and 17.3%, respectively.</li>
</ul>



Sciclone Pharmaceuticals (6600 HK)'s scheme document is out, and the court meeting is scheduled for 19 June. The IFA considers the HK$18.80 per share offer fair and reasonable. 
The key condition is approval by at least 75% of disinterested shareholders (&lt;10% of all disinterested shareholders rejection). No independent shareholder holds a blocking stake.
This is a done deal. At the last close and for the 12 July payment, the gross and annualised spread is 2.2% and 17.3%, respectively.


SciClone Pharma (6600 HK): Scheme Vote on 19 June

Yichang HEC Changjiang Pharma / Event-Driven

<ul>
<li>
<a href="https://www.smartkarma.com/entities/yichang-hec-changjiang-pharmaceutical" target="_blank" data-smartkarma-citation="entities:21040:1" rel="noopener">Yichang HEC Changjiang Pharma (1558 HK)</a>'s pre-conditional privatisation from Sunshine Lake Pharma comprises scrip (0.263614 new offeror H Share per HEC CJ Pharma share) and cash (special dividend of HK$1.5).</li>
<li>The pre-condition is regulatory approvals from NDRC, MOFCOM, and SAFE. The key condition is approval by at least 75% of independent H Shareholders (&lt;10% of all independent H Shareholders rejection). </li>
<li>There is valuation uncertainty as the offeror is unlisted, and its valuation hinges on pipeline products. Nevertheless, with no shareholder close to a blocking stake, the deal should get up.   </li>
</ul>



Yichang HEC Changjiang Pharma (1558 HK)'s pre-conditional privatisation from Sunshine Lake Pharma comprises scrip (0.263614 new offeror H Share per HEC CJ Pharma share) and cash (special dividend of HK$1.5).
The pre-condition is regulatory approvals from NDRC, MOFCOM, and SAFE. The key condition is approval by at least 75% of independent H Shareholders (&lt;10% of all independent H Shareholders rejection). 
There is valuation uncertainty as the offeror is unlisted, and its valuation hinges on pipeline products. Nevertheless, with no shareholder close to a blocking stake, the deal should get up.   


HEC CJ Pharma (1558 HK): Pre-Conditional Share Exchange Offer from Largest Shareholder

Quality-Value Investing

Marc Melendez, CFA

Emerging Market Small and Mid Cap Equities

Reperio Capital

Reperio Capital Research was founded in 2013 with the goal of better serving the investment community with in-depth, high quality, value oriented research.

Reperio means to discover in latin. Using value investing principles, we aim to discover a minimum of 12 investment opportunities per year within the Emerging Markets Small and Mid Cap universe.

We take a business owners perspective with a long term investment horizon. We conduct bottom up, fundamental research. We focus on downside risks and require a significant margin of safety in any investment to prevent the permanent loss of capital. All factors differentiating our research from the short term, trading focus of traditional research providers.

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/ssy-group-ltd" target="_blank" data-smartkarma-citation="entities:7799:1" rel="noopener">SSY Group Ltd (2005 HK)</a> is a manufacturer of intravenous solutions in China. Since 2007, its intravenous solutions revenue grew by 22.1% per year. In H1 2020, as a result of the pandemic, hospital admissions fell and the demand for IVs dropped causing the company’s sales to decline by 23.3% year-on-year. As the pandemic passes and hospital admissions normalize IV sales should normalize
Prior to the pandemic, the IV market was expected to grow by 8.4% per year. SSY should be able to grow faster than the market as it expands its distribution network. There are also economies of scale that will allow it to take share from smaller players. The company's growth trajectory is returning with Q3 2020 sales increasing by 12% YoY.
With SSY’s share price down 50% from its peak of HKD9.46, there is limited downside. There is 9% downside to the bear case, 81% upside to the base case, and 260% upside to the bull case. 
Despite its problems being temporary, its potential growth rates, strong competitive position, and good management team, SSY  trades on an EV/2019 EBIT of 12.6 times. At its peak valuation in June 2018, the market valued the company at 27.9 times its trailing twelve month EBIT.
SSY is a very attractive opportunity with a very strong chance of doubling your money over the next three years as the company’s temporary issues should be resolved within the next year or two.

SSY Group Ltd (2005 HK) is a manufacturer of intravenous solutions in China. Since 2007, its intravenous solutions revenue grew by 22.1% per year. In H1 2020, as a result of the pandemic, hospital admissions fell and the demand for IVs dropped causing the company’s sales to decline by 23.3% year-on-year. As the pandemic passes and hospital admissions normalize IV sales should normalize
Prior to the pandemic, the IV market was expected to grow by 8.4% per year. SSY should be able to grow faster than the market as it expands its distribution network. There are also economies of scale that will allow it to take share from smaller players. The company's growth trajectory is returning with Q3 2020 sales increasing by 12% YoY.
With SSY’s share price down 50% from its peak of HKD9.46, there is limited downside. There is 9% downside to the bear case, 81% upside to the base case, and 260% upside to the bull case. 
Despite its problems being temporary, its potential growth rates, strong competitive position, and good management team, SSY  trades on an EV/2019 EBIT of 12.6 times. At its peak valuation in June 2018, the market valued the company at 27.9 times its trailing twelve month EBIT.
SSY is a very attractive opportunity with a very strong chance of doubling your money over the next three years as the company’s temporary issues should be resolved within the next year or two.

SSY Group- A Chinese IV Bag Manufacturer Facing Short Term Issues, but Strong Long Term Outlook

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

China Shineway Pharmaceutical / Equity Bottom-Up

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?

Hong Kong

SSY Group Limited researches, develops, manufactures, and sells a wide range of pharmaceutical products.  The Company sells non PVC soft bags, PP plastic bottles, and glass bottle infusions.

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SSY Group Ltd (2005 HK)

Technically Speaking, Breakouts and Breakdowns: HONG KONG (AUGUST 15)

Successful returns in Hong Kong has meant getting the industry right! Lygend benefits from moratorium on new nickel mine permits. Sino Bio RX...

David Mudd

SciClone Pharma (6600 HK): Scheme Vote on 19 June

SciClone has received a letter of support from Pentwater Capital Management to vote YES. Pentwater represents 4.64% of out. shares and 8.51% of...

Arun George

SSY Group- A Chinese IV Bag Manufacturer Facing Short Term Issues, but Strong Long Term Outlook

SSY Group is facing short term issues related to the pandemic. As the world normalizes it should win share and grow at a low double-digit pace for...

Reperio Capital

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

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52-week Range

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Technically Speaking, Breakouts and Breakdowns: HONG KONG (AUGUST 15)

Successful returns in Hong Kong has meant getting the industry right! Lygend benefits from moratorium on new nickel mine permits. Sino Bio RX...

David Mudd

SciClone Pharma (6600 HK): Scheme Vote on 19 June

SciClone has received a letter of support from Pentwater Capital Management to vote YES. Pentwater represents 4.64% of out. shares and 8.51% of...

Arun George

HEC CJ Pharma (1558 HK): Pre-Conditional Share Exchange Offer from Largest Shareholder

There is scrip valuation uncertainty as the offeror is unlisted, and its valuation hinges on pipeline products. Nevertheless, the deal should get...

Arun George

SSY Group- A Chinese IV Bag Manufacturer Facing Short Term Issues, but Strong Long Term Outlook

SSY Group is facing short term issues related to the pandemic. As the world normalizes it should win share and grow at a low double-digit pace for...

Reperio Capital

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