Equity Bottom-Up

In this briefing:

1. Banco Do Brasil (BBAS3) – Capital Contributions from Potential Non-Core Disposals
2. KDDI: Key Takeaways from Company Visit Are Mostly Positive
3. Harmonic Drive: Measuring the Potential Downside Risk
4. Sunpower: Excellent FY18 Results; Strong Outlook for FY19. Fair Value Remains 1 SGD (70% Upside)
5. QH: 2018 Earnings Grew 10% In-Line with Our Forecast

1. Banco Do Brasil (BBAS3) – Capital Contributions from Potential Non-Core Disposals

• Banco Do Brasil Sa (BBAS3 BZ) management is exploring non-core disposals, across its investment portfolio
• Its stakes in Banco Votorantim, utility holding Neoenergia and its Argentinian subsidiary Banco Patagonia Sa (BPAT AR) have been most readily mentioned, and are the most likely candidates, in our view
• The disposal timings, we expect, could be nearer term for domestic, Brazilian assets, with Banco Patagonia more likely to be a longer term project (2020?); still, we see such potential disposals as positive catalysts for Banco do Brasil shares
• We estimate that the CET1 accretion from disposals could total 73-80bps, of which the net gain from these potential disposals could add between 10-17 bps , with the risk weighted asset (RWA) reduction expected to free up an additional 63bps of CET1

2. KDDI: Key Takeaways from Company Visit Are Mostly Positive

We expect the Q4 18 report in mid-May will be pivotal for sentiment on KDDI Corp (9433 JP) as the results for its current mid-term plan are announced and new targets for the next three years are set. This plays against a backdrop of moderately higher competitive intensity both in the near-term on cheap handsets and longer-term with Rakuten Inc (4755 JP)  market entry. Shares are down 15% from highs in September 2018 as markets have factored in the new state of affairs but coming out of our meeting with the company today we feel more confident in how they are positioned. 

3. Harmonic Drive: Measuring the Potential Downside Risk

With Harmonic Drive Systems (6324 JP) having rebounded as much as 56% from its trough this year, risk-reward looks decidedly less attractive now. While we had been somewhat constructive on the name due to order looking like they have a hit bottom, a closer analysis of the breakdown of orders has us thinking that a potential rebound could underwhelm relative to the markets revenue expectations and that the stock’s premium multiple could leave it more vulnerable than more modestly priced peers.

4. Sunpower: Excellent FY18 Results; Strong Outlook for FY19. Fair Value Remains 1 SGD (70% Upside)

Sunpower Group (SPWG SP) has seen an incredible transformation over the past 24 months. Since the entry of two respected PE funds (DCP and CDH) the company has de-emphasized its historical M&S business and pushed full throttle on its GI (Green Investments) portfolio.

The efforts of this shift to GI are now bearing fruit with FY18 revenues increasing by 66% to 3.26 billion RMB, EBITDA rising by 113.5% to 496 million RMB (15.2% EBITDA margin) and underlying NPAT rising by 87% to 268 million RMB. Most importantly, the quality and visibility of its cash flows have improved.

It is rare to find companies that give you 3-year NPAT forecasts but Sunpower did this with the issuance of its second CB late 3Q18. Instead of using stale sell-side consensus forecasts we now focus on these public forecasts to guide investors what Sunpower’s fair value is depending on the PE multiple that investors apply.

My Fair Value estimate of 1 SGD remains unchanged (based on 15x FY21 EPS and company meeting its FY21 NPAT targets as communicated in CB2 prospectus).

5. QH: 2018 Earnings Grew 10% In-Line with Our Forecast

QH has 4Q18 net profit of Bt786m (-13%YoY, -40%QoQ). The 2018 result was in-line with our expectation.

• 4Q18 earnings from property development segment drop 36%YoY caused by one time charge of Bt150m from litigation and lead to higher SG&A-to-sales to 25.4% from 18.1% in 4Q17. Meanwhile, total sales grew 20%YoY.
• 4Q18 equity income grew 12%YoY at Bt493m driven by HMPRO contribution which derived from its branches expansion and HMPRO S.
• 2018 core earnings grew 83%YoY to Bt2.0bn backed by gross margin improvement and better SG&A controls. Meanwhile, sales drop 6% YoY due to lower new project launches.
• We maintain positive outlook in 19-20E driven by Q Sukhumvit transfer and foresee little impact from LTV implementation. QH’s portfolio are based on luxury segment and 50% of net profit come from equity income which mainly driven by HMPRO.
• Announced an interim dividend payment of Bt0.14 (XD on 24 Apr), which is equivalent to 4.3% upcoming dividend yield.

We maintain our BUY rating with a target price of Bt3.9 based on 10xPE’19E.

In this briefing:

1. KDDI: Key Takeaways from Company Visit Are Mostly Positive
2. Harmonic Drive: Measuring the Potential Downside Risk
3. Sunpower: Excellent FY18 Results; Strong Outlook for FY19. Fair Value Remains 1 SGD (70% Upside)
4. QH: 2018 Earnings Grew 10% In-Line with Our Forecast
5. Biosimilar Battlefield: Unpacking Celltrion

1. KDDI: Key Takeaways from Company Visit Are Mostly Positive

We expect the Q4 18 report in mid-May will be pivotal for sentiment on KDDI Corp (9433 JP) as the results for its current mid-term plan are announced and new targets for the next three years are set. This plays against a backdrop of moderately higher competitive intensity both in the near-term on cheap handsets and longer-term with Rakuten Inc (4755 JP)  market entry. Shares are down 15% from highs in September 2018 as markets have factored in the new state of affairs but coming out of our meeting with the company today we feel more confident in how they are positioned. 

2. Harmonic Drive: Measuring the Potential Downside Risk

With Harmonic Drive Systems (6324 JP) having rebounded as much as 56% from its trough this year, risk-reward looks decidedly less attractive now. While we had been somewhat constructive on the name due to order looking like they have a hit bottom, a closer analysis of the breakdown of orders has us thinking that a potential rebound could underwhelm relative to the markets revenue expectations and that the stock’s premium multiple could leave it more vulnerable than more modestly priced peers.

3. Sunpower: Excellent FY18 Results; Strong Outlook for FY19. Fair Value Remains 1 SGD (70% Upside)

Sunpower Group (SPWG SP) has seen an incredible transformation over the past 24 months. Since the entry of two respected PE funds (DCP and CDH) the company has de-emphasized its historical M&S business and pushed full throttle on its GI (Green Investments) portfolio.

The efforts of this shift to GI are now bearing fruit with FY18 revenues increasing by 66% to 3.26 billion RMB, EBITDA rising by 113.5% to 496 million RMB (15.2% EBITDA margin) and underlying NPAT rising by 87% to 268 million RMB. Most importantly, the quality and visibility of its cash flows have improved.

It is rare to find companies that give you 3-year NPAT forecasts but Sunpower did this with the issuance of its second CB late 3Q18. Instead of using stale sell-side consensus forecasts we now focus on these public forecasts to guide investors what Sunpower’s fair value is depending on the PE multiple that investors apply.

My Fair Value estimate of 1 SGD remains unchanged (based on 15x FY21 EPS and company meeting its FY21 NPAT targets as communicated in CB2 prospectus).

4. QH: 2018 Earnings Grew 10% In-Line with Our Forecast

QH has 4Q18 net profit of Bt786m (-13%YoY, -40%QoQ). The 2018 result was in-line with our expectation.

• 4Q18 earnings from property development segment drop 36%YoY caused by one time charge of Bt150m from litigation and lead to higher SG&A-to-sales to 25.4% from 18.1% in 4Q17. Meanwhile, total sales grew 20%YoY.
• 4Q18 equity income grew 12%YoY at Bt493m driven by HMPRO contribution which derived from its branches expansion and HMPRO S.
• 2018 core earnings grew 83%YoY to Bt2.0bn backed by gross margin improvement and better SG&A controls. Meanwhile, sales drop 6% YoY due to lower new project launches.
• We maintain positive outlook in 19-20E driven by Q Sukhumvit transfer and foresee little impact from LTV implementation. QH’s portfolio are based on luxury segment and 50% of net profit come from equity income which mainly driven by HMPRO.
• Announced an interim dividend payment of Bt0.14 (XD on 24 Apr), which is equivalent to 4.3% upcoming dividend yield.

We maintain our BUY rating with a target price of Bt3.9 based on 10xPE’19E.

5. Biosimilar Battlefield: Unpacking Celltrion

Both Celltrion Inc (068270 KS) and Celltrion Healthcare (091990 KS) have reported preliminary 2018 results with some MD&A. As suspected, Q4’s results for both companies reflected factors beyond distributors’ destocking: retroactive price adjustments played a major role. This Insight includes updated end market sales forecasts by product. Remsima should grow in the US and decline moderately in the EU (the latter is a best-case scenario). Both Herzuma and Truxima will launch in the US this year with Truxima the largest contributor. Capacity expansion programs should keep margins under pressure near-term.

In this briefing:

1. Harmonic Drive: Measuring the Potential Downside Risk
2. Sunpower: Excellent FY18 Results; Strong Outlook for FY19. Fair Value Remains 1 SGD (70% Upside)
3. QH: 2018 Earnings Grew 10% In-Line with Our Forecast
4. Biosimilar Battlefield: Unpacking Celltrion
5. Hitachi Chemical (4217) Bad News All in the Price. Outlook on 12 Month View Is Bright. BUY

1. Harmonic Drive: Measuring the Potential Downside Risk

With Harmonic Drive Systems (6324 JP) having rebounded as much as 56% from its trough this year, risk-reward looks decidedly less attractive now. While we had been somewhat constructive on the name due to order looking like they have a hit bottom, a closer analysis of the breakdown of orders has us thinking that a potential rebound could underwhelm relative to the markets revenue expectations and that the stock’s premium multiple could leave it more vulnerable than more modestly priced peers.

2. Sunpower: Excellent FY18 Results; Strong Outlook for FY19. Fair Value Remains 1 SGD (70% Upside)

Sunpower Group (SPWG SP) has seen an incredible transformation over the past 24 months. Since the entry of two respected PE funds (DCP and CDH) the company has de-emphasized its historical M&S business and pushed full throttle on its GI (Green Investments) portfolio.

The efforts of this shift to GI are now bearing fruit with FY18 revenues increasing by 66% to 3.26 billion RMB, EBITDA rising by 113.5% to 496 million RMB (15.2% EBITDA margin) and underlying NPAT rising by 87% to 268 million RMB. Most importantly, the quality and visibility of its cash flows have improved.

It is rare to find companies that give you 3-year NPAT forecasts but Sunpower did this with the issuance of its second CB late 3Q18. Instead of using stale sell-side consensus forecasts we now focus on these public forecasts to guide investors what Sunpower’s fair value is depending on the PE multiple that investors apply.

My Fair Value estimate of 1 SGD remains unchanged (based on 15x FY21 EPS and company meeting its FY21 NPAT targets as communicated in CB2 prospectus).

3. QH: 2018 Earnings Grew 10% In-Line with Our Forecast

QH has 4Q18 net profit of Bt786m (-13%YoY, -40%QoQ). The 2018 result was in-line with our expectation.

• 4Q18 earnings from property development segment drop 36%YoY caused by one time charge of Bt150m from litigation and lead to higher SG&A-to-sales to 25.4% from 18.1% in 4Q17. Meanwhile, total sales grew 20%YoY.
• 4Q18 equity income grew 12%YoY at Bt493m driven by HMPRO contribution which derived from its branches expansion and HMPRO S.
• 2018 core earnings grew 83%YoY to Bt2.0bn backed by gross margin improvement and better SG&A controls. Meanwhile, sales drop 6% YoY due to lower new project launches.
• We maintain positive outlook in 19-20E driven by Q Sukhumvit transfer and foresee little impact from LTV implementation. QH’s portfolio are based on luxury segment and 50% of net profit come from equity income which mainly driven by HMPRO.
• Announced an interim dividend payment of Bt0.14 (XD on 24 Apr), which is equivalent to 4.3% upcoming dividend yield.

We maintain our BUY rating with a target price of Bt3.9 based on 10xPE’19E.

4. Biosimilar Battlefield: Unpacking Celltrion

Both Celltrion Inc (068270 KS) and Celltrion Healthcare (091990 KS) have reported preliminary 2018 results with some MD&A. As suspected, Q4’s results for both companies reflected factors beyond distributors’ destocking: retroactive price adjustments played a major role. This Insight includes updated end market sales forecasts by product. Remsima should grow in the US and decline moderately in the EU (the latter is a best-case scenario). Both Herzuma and Truxima will launch in the US this year with Truxima the largest contributor. Capacity expansion programs should keep margins under pressure near-term.

5. Hitachi Chemical (4217) Bad News All in the Price. Outlook on 12 Month View Is Bright. BUY

After the recent inspection issues, the company clearly needs to tighten compliance issues and is now talking about improving profitability over the next two years by getting rid of low profit and none core businesses.  Given the current valuations, the mid-term outlook and the renewed focus on profitability we would look to buy here. The internal issues that have hit the share price in the past appear behind them. We would look for an operating profit of about Y50bn to 3/20 which would put the shares on an EV/ebitda multiple of about 5x. The shares yield 3% and still trade at book.

In this briefing:

1. Sunpower: Excellent FY18 Results; Strong Outlook for FY19. Fair Value Remains 1 SGD (70% Upside)
2. QH: 2018 Earnings Grew 10% In-Line with Our Forecast
3. Biosimilar Battlefield: Unpacking Celltrion
4. Hitachi Chemical (4217) Bad News All in the Price. Outlook on 12 Month View Is Bright. BUY
5. Amarin Q4 2018 Conference Call–Strong Sales & High Confidence

1. Sunpower: Excellent FY18 Results; Strong Outlook for FY19. Fair Value Remains 1 SGD (70% Upside)

Sunpower Group (SPWG SP) has seen an incredible transformation over the past 24 months. Since the entry of two respected PE funds (DCP and CDH) the company has de-emphasized its historical M&S business and pushed full throttle on its GI (Green Investments) portfolio.

The efforts of this shift to GI are now bearing fruit with FY18 revenues increasing by 66% to 3.26 billion RMB, EBITDA rising by 113.5% to 496 million RMB (15.2% EBITDA margin) and underlying NPAT rising by 87% to 268 million RMB. Most importantly, the quality and visibility of its cash flows have improved.

It is rare to find companies that give you 3-year NPAT forecasts but Sunpower did this with the issuance of its second CB late 3Q18. Instead of using stale sell-side consensus forecasts we now focus on these public forecasts to guide investors what Sunpower’s fair value is depending on the PE multiple that investors apply.

My Fair Value estimate of 1 SGD remains unchanged (based on 15x FY21 EPS and company meeting its FY21 NPAT targets as communicated in CB2 prospectus).

2. QH: 2018 Earnings Grew 10% In-Line with Our Forecast

QH has 4Q18 net profit of Bt786m (-13%YoY, -40%QoQ). The 2018 result was in-line with our expectation.

• 4Q18 earnings from property development segment drop 36%YoY caused by one time charge of Bt150m from litigation and lead to higher SG&A-to-sales to 25.4% from 18.1% in 4Q17. Meanwhile, total sales grew 20%YoY.
• 4Q18 equity income grew 12%YoY at Bt493m driven by HMPRO contribution which derived from its branches expansion and HMPRO S.
• 2018 core earnings grew 83%YoY to Bt2.0bn backed by gross margin improvement and better SG&A controls. Meanwhile, sales drop 6% YoY due to lower new project launches.
• We maintain positive outlook in 19-20E driven by Q Sukhumvit transfer and foresee little impact from LTV implementation. QH’s portfolio are based on luxury segment and 50% of net profit come from equity income which mainly driven by HMPRO.
• Announced an interim dividend payment of Bt0.14 (XD on 24 Apr), which is equivalent to 4.3% upcoming dividend yield.

We maintain our BUY rating with a target price of Bt3.9 based on 10xPE’19E.

3. Biosimilar Battlefield: Unpacking Celltrion

Both Celltrion Inc (068270 KS) and Celltrion Healthcare (091990 KS) have reported preliminary 2018 results with some MD&A. As suspected, Q4’s results for both companies reflected factors beyond distributors’ destocking: retroactive price adjustments played a major role. This Insight includes updated end market sales forecasts by product. Remsima should grow in the US and decline moderately in the EU (the latter is a best-case scenario). Both Herzuma and Truxima will launch in the US this year with Truxima the largest contributor. Capacity expansion programs should keep margins under pressure near-term.

4. Hitachi Chemical (4217) Bad News All in the Price. Outlook on 12 Month View Is Bright. BUY

After the recent inspection issues, the company clearly needs to tighten compliance issues and is now talking about improving profitability over the next two years by getting rid of low profit and none core businesses.  Given the current valuations, the mid-term outlook and the renewed focus on profitability we would look to buy here. The internal issues that have hit the share price in the past appear behind them. We would look for an operating profit of about Y50bn to 3/20 which would put the shares on an EV/ebitda multiple of about 5x. The shares yield 3% and still trade at book.

5. Amarin Q4 2018 Conference Call–Strong Sales & High Confidence

Q4 2018 Revenues Stronger Than Pre-Announcement on January 4th: Amarin released its Q4 2018 results today and held a conference call. Results of $77m in sales (+44% YoY), were stronger than the January 4th pre-announced range of $72m and $76m.  2019 revenue guidance of 50% growth to $350m was left unchanged, but management sounded very confident on the conference call (see details below). 

Q1 2019 Revenue Growth Appears Stronger than Expected: On the conference call, Amarin was asked whether Q1 revenues were tracking the prescription data, which indicates +50% YoY growth so far. Management said that sales looked about the same, despite revenues tending not to track prescriptions that closely in Q1 normally.   

FDA May Fast-Track Vascepa Label Expansion: While Amarin’s CEO, John Thero, is usually very conservative with guidance, today he explored the possibilities of fast-track treatment by the FDA for Vascepa’s label expansion for the first time. Amarin is still on course to file for this with the FDA by March-end. Fast-track treatment by the FDA would speed up the approval process to 6 months, versus 10 months, and if favorable, could have significant upside impact on 2019 revenues. 

Approval for Vascepa in Europe to be Sought This Year: Amarin disclosed for the first time that it would seek approval for Vascepa in Europe this year. This is highly significant because the cardiovascular disease (CVD) patient population is 22% higher than the US. Amarin confirmed that FDA approval for label expansion would speed up the approval process in Europe. 

Next Catalyst is the ACC Conference on March 18th: Amarin will be announcing “late-breaking” data from the Reduce-It clinical trial at the American College of Cardiology on March 18th. Because the Reduce-It trial results themselves were so powerful, we expect the ACC event to be of high interest among CVD specialists and investors. 

Amarin Remains an Attractive Take-Over Candidate: Given the high efficacy of Vascepa in the treatment of CVD patients, Amarin continues to be one of the most highly attractive take-over candidates in the pharmaceutical world. Management’s confidence on today’s call appears to be linked to a stronger than expected response to Vascepa among doctors since its block-buster trial results were announced last September. For details about our outlook on Amarin, please refer to our deep-dive report published last month: Amarin–2019’s Biggest Buyout Target for Big Pharma

In this briefing:

1. QH: 2018 Earnings Grew 10% In-Line with Our Forecast
2. Biosimilar Battlefield: Unpacking Celltrion
3. Hitachi Chemical (4217) Bad News All in the Price. Outlook on 12 Month View Is Bright. BUY
4. Amarin Q4 2018 Conference Call–Strong Sales & High Confidence
5. Hargreaves Lansdown (HL/:LN) No Flow, No Go

1. QH: 2018 Earnings Grew 10% In-Line with Our Forecast

QH has 4Q18 net profit of Bt786m (-13%YoY, -40%QoQ). The 2018 result was in-line with our expectation.

• 4Q18 earnings from property development segment drop 36%YoY caused by one time charge of Bt150m from litigation and lead to higher SG&A-to-sales to 25.4% from 18.1% in 4Q17. Meanwhile, total sales grew 20%YoY.
• 4Q18 equity income grew 12%YoY at Bt493m driven by HMPRO contribution which derived from its branches expansion and HMPRO S.
• 2018 core earnings grew 83%YoY to Bt2.0bn backed by gross margin improvement and better SG&A controls. Meanwhile, sales drop 6% YoY due to lower new project launches.
• We maintain positive outlook in 19-20E driven by Q Sukhumvit transfer and foresee little impact from LTV implementation. QH’s portfolio are based on luxury segment and 50% of net profit come from equity income which mainly driven by HMPRO.
• Announced an interim dividend payment of Bt0.14 (XD on 24 Apr), which is equivalent to 4.3% upcoming dividend yield.

We maintain our BUY rating with a target price of Bt3.9 based on 10xPE’19E.

2. Biosimilar Battlefield: Unpacking Celltrion

Both Celltrion Inc (068270 KS) and Celltrion Healthcare (091990 KS) have reported preliminary 2018 results with some MD&A. As suspected, Q4’s results for both companies reflected factors beyond distributors’ destocking: retroactive price adjustments played a major role. This Insight includes updated end market sales forecasts by product. Remsima should grow in the US and decline moderately in the EU (the latter is a best-case scenario). Both Herzuma and Truxima will launch in the US this year with Truxima the largest contributor. Capacity expansion programs should keep margins under pressure near-term.

3. Hitachi Chemical (4217) Bad News All in the Price. Outlook on 12 Month View Is Bright. BUY

After the recent inspection issues, the company clearly needs to tighten compliance issues and is now talking about improving profitability over the next two years by getting rid of low profit and none core businesses.  Given the current valuations, the mid-term outlook and the renewed focus on profitability we would look to buy here. The internal issues that have hit the share price in the past appear behind them. We would look for an operating profit of about Y50bn to 3/20 which would put the shares on an EV/ebitda multiple of about 5x. The shares yield 3% and still trade at book.

4. Amarin Q4 2018 Conference Call–Strong Sales & High Confidence

Q4 2018 Revenues Stronger Than Pre-Announcement on January 4th: Amarin released its Q4 2018 results today and held a conference call. Results of $77m in sales (+44% YoY), were stronger than the January 4th pre-announced range of $72m and $76m.  2019 revenue guidance of 50% growth to $350m was left unchanged, but management sounded very confident on the conference call (see details below). 

Q1 2019 Revenue Growth Appears Stronger than Expected: On the conference call, Amarin was asked whether Q1 revenues were tracking the prescription data, which indicates +50% YoY growth so far. Management said that sales looked about the same, despite revenues tending not to track prescriptions that closely in Q1 normally.   

FDA May Fast-Track Vascepa Label Expansion: While Amarin’s CEO, John Thero, is usually very conservative with guidance, today he explored the possibilities of fast-track treatment by the FDA for Vascepa’s label expansion for the first time. Amarin is still on course to file for this with the FDA by March-end. Fast-track treatment by the FDA would speed up the approval process to 6 months, versus 10 months, and if favorable, could have significant upside impact on 2019 revenues. 

Approval for Vascepa in Europe to be Sought This Year: Amarin disclosed for the first time that it would seek approval for Vascepa in Europe this year. This is highly significant because the cardiovascular disease (CVD) patient population is 22% higher than the US. Amarin confirmed that FDA approval for label expansion would speed up the approval process in Europe. 

Next Catalyst is the ACC Conference on March 18th: Amarin will be announcing “late-breaking” data from the Reduce-It clinical trial at the American College of Cardiology on March 18th. Because the Reduce-It trial results themselves were so powerful, we expect the ACC event to be of high interest among CVD specialists and investors. 

Amarin Remains an Attractive Take-Over Candidate: Given the high efficacy of Vascepa in the treatment of CVD patients, Amarin continues to be one of the most highly attractive take-over candidates in the pharmaceutical world. Management’s confidence on today’s call appears to be linked to a stronger than expected response to Vascepa among doctors since its block-buster trial results were announced last September. For details about our outlook on Amarin, please refer to our deep-dive report published last month: Amarin–2019’s Biggest Buyout Target for Big Pharma

5. Hargreaves Lansdown (HL/:LN) No Flow, No Go

The political decision to exit the European Union has unpredictable negative consequences for both the UK economy and stockmarket.  A tough market background and Brexit concerns have reduced in-flows into Wealth and Investment Management companies. This growth hiatus could last for some time.  

Hargreaves Lansdown: What does it do ?

Hargreaves Lansdown is a wealth manager and private client stockbroker with a market value of  GBP8bn. It provides the UK’s largest direct to investor platform administering £86bn of investments for more than 1.1m active clients

Why is it in the Short portfolio ?

Interim figures for the 6 months to December 2018, (published 29th Jan)  mark a deterioration in operating performance brought about by adverse market conditions. Assets under administration declined and net new business was 25% down on the prior year. Earnings per share increased 4%. The share price declined 6% on the day of the results but has subsequently been stable leaving the group on a forward multiple of over 30x. Unless the retail investment market recovers quickly this premium rating may prove vulnerable. 

In this briefing:

1. Biosimilar Battlefield: Unpacking Celltrion
2. Hitachi Chemical (4217) Bad News All in the Price. Outlook on 12 Month View Is Bright. BUY
3. Amarin Q4 2018 Conference Call–Strong Sales & High Confidence
4. Hargreaves Lansdown (HL/:LN) No Flow, No Go
5. Dhanlaxmi Bank- Free from the PCA Stranglehold

1. Biosimilar Battlefield: Unpacking Celltrion

Both Celltrion Inc (068270 KS) and Celltrion Healthcare (091990 KS) have reported preliminary 2018 results with some MD&A. As suspected, Q4’s results for both companies reflected factors beyond distributors’ destocking: retroactive price adjustments played a major role. This Insight includes updated end market sales forecasts by product. Remsima should grow in the US and decline moderately in the EU (the latter is a best-case scenario). Both Herzuma and Truxima will launch in the US this year with Truxima the largest contributor. Capacity expansion programs should keep margins under pressure near-term.

2. Hitachi Chemical (4217) Bad News All in the Price. Outlook on 12 Month View Is Bright. BUY

After the recent inspection issues, the company clearly needs to tighten compliance issues and is now talking about improving profitability over the next two years by getting rid of low profit and none core businesses.  Given the current valuations, the mid-term outlook and the renewed focus on profitability we would look to buy here. The internal issues that have hit the share price in the past appear behind them. We would look for an operating profit of about Y50bn to 3/20 which would put the shares on an EV/ebitda multiple of about 5x. The shares yield 3% and still trade at book.

3. Amarin Q4 2018 Conference Call–Strong Sales & High Confidence

Q4 2018 Revenues Stronger Than Pre-Announcement on January 4th: Amarin released its Q4 2018 results today and held a conference call. Results of $77m in sales (+44% YoY), were stronger than the January 4th pre-announced range of $72m and $76m.  2019 revenue guidance of 50% growth to $350m was left unchanged, but management sounded very confident on the conference call (see details below). 

Q1 2019 Revenue Growth Appears Stronger than Expected: On the conference call, Amarin was asked whether Q1 revenues were tracking the prescription data, which indicates +50% YoY growth so far. Management said that sales looked about the same, despite revenues tending not to track prescriptions that closely in Q1 normally.   

FDA May Fast-Track Vascepa Label Expansion: While Amarin’s CEO, John Thero, is usually very conservative with guidance, today he explored the possibilities of fast-track treatment by the FDA for Vascepa’s label expansion for the first time. Amarin is still on course to file for this with the FDA by March-end. Fast-track treatment by the FDA would speed up the approval process to 6 months, versus 10 months, and if favorable, could have significant upside impact on 2019 revenues. 

Approval for Vascepa in Europe to be Sought This Year: Amarin disclosed for the first time that it would seek approval for Vascepa in Europe this year. This is highly significant because the cardiovascular disease (CVD) patient population is 22% higher than the US. Amarin confirmed that FDA approval for label expansion would speed up the approval process in Europe. 

Next Catalyst is the ACC Conference on March 18th: Amarin will be announcing “late-breaking” data from the Reduce-It clinical trial at the American College of Cardiology on March 18th. Because the Reduce-It trial results themselves were so powerful, we expect the ACC event to be of high interest among CVD specialists and investors. 

Amarin Remains an Attractive Take-Over Candidate: Given the high efficacy of Vascepa in the treatment of CVD patients, Amarin continues to be one of the most highly attractive take-over candidates in the pharmaceutical world. Management’s confidence on today’s call appears to be linked to a stronger than expected response to Vascepa among doctors since its block-buster trial results were announced last September. For details about our outlook on Amarin, please refer to our deep-dive report published last month: Amarin–2019’s Biggest Buyout Target for Big Pharma

4. Hargreaves Lansdown (HL/:LN) No Flow, No Go

The political decision to exit the European Union has unpredictable negative consequences for both the UK economy and stockmarket.  A tough market background and Brexit concerns have reduced in-flows into Wealth and Investment Management companies. This growth hiatus could last for some time.  

Hargreaves Lansdown: What does it do ?

Hargreaves Lansdown is a wealth manager and private client stockbroker with a market value of  GBP8bn. It provides the UK’s largest direct to investor platform administering £86bn of investments for more than 1.1m active clients

Why is it in the Short portfolio ?

Interim figures for the 6 months to December 2018, (published 29th Jan)  mark a deterioration in operating performance brought about by adverse market conditions. Assets under administration declined and net new business was 25% down on the prior year. Earnings per share increased 4%. The share price declined 6% on the day of the results but has subsequently been stable leaving the group on a forward multiple of over 30x. Unless the retail investment market recovers quickly this premium rating may prove vulnerable. 

5. Dhanlaxmi Bank- Free from the PCA Stranglehold

Dhanlaxmi Bank (DHLBK IN) share price has surged by 10% today on the back of RBI move to take it out of Prompt Corrective Action (PCA) following improvement in its financial ratios. We have mentioned in our earlier reports (please click here, here and here) about the helplessness of the bank as it couldn’t lend due to restrictions from RBI.

Now as the grip is loosened, Dhanlaxmi can resume lending activities and improve its financial ratios without adding any new capital in the near term.

We analyze the implications post PCA through this report.

In this briefing:

1. Hitachi Chemical (4217) Bad News All in the Price. Outlook on 12 Month View Is Bright. BUY
2. Amarin Q4 2018 Conference Call–Strong Sales & High Confidence
3. Hargreaves Lansdown (HL/:LN) No Flow, No Go
4. Dhanlaxmi Bank- Free from the PCA Stranglehold
5. AMD. Market Share Gains Across The Board As Intel Vows To Fight To Protect Its Position

1. Hitachi Chemical (4217) Bad News All in the Price. Outlook on 12 Month View Is Bright. BUY

After the recent inspection issues, the company clearly needs to tighten compliance issues and is now talking about improving profitability over the next two years by getting rid of low profit and none core businesses.  Given the current valuations, the mid-term outlook and the renewed focus on profitability we would look to buy here. The internal issues that have hit the share price in the past appear behind them. We would look for an operating profit of about Y50bn to 3/20 which would put the shares on an EV/ebitda multiple of about 5x. The shares yield 3% and still trade at book.

2. Amarin Q4 2018 Conference Call–Strong Sales & High Confidence

Q4 2018 Revenues Stronger Than Pre-Announcement on January 4th: Amarin released its Q4 2018 results today and held a conference call. Results of $77m in sales (+44% YoY), were stronger than the January 4th pre-announced range of $72m and $76m.  2019 revenue guidance of 50% growth to $350m was left unchanged, but management sounded very confident on the conference call (see details below). 

Q1 2019 Revenue Growth Appears Stronger than Expected: On the conference call, Amarin was asked whether Q1 revenues were tracking the prescription data, which indicates +50% YoY growth so far. Management said that sales looked about the same, despite revenues tending not to track prescriptions that closely in Q1 normally.   

FDA May Fast-Track Vascepa Label Expansion: While Amarin’s CEO, John Thero, is usually very conservative with guidance, today he explored the possibilities of fast-track treatment by the FDA for Vascepa’s label expansion for the first time. Amarin is still on course to file for this with the FDA by March-end. Fast-track treatment by the FDA would speed up the approval process to 6 months, versus 10 months, and if favorable, could have significant upside impact on 2019 revenues. 

Approval for Vascepa in Europe to be Sought This Year: Amarin disclosed for the first time that it would seek approval for Vascepa in Europe this year. This is highly significant because the cardiovascular disease (CVD) patient population is 22% higher than the US. Amarin confirmed that FDA approval for label expansion would speed up the approval process in Europe. 

Next Catalyst is the ACC Conference on March 18th: Amarin will be announcing “late-breaking” data from the Reduce-It clinical trial at the American College of Cardiology on March 18th. Because the Reduce-It trial results themselves were so powerful, we expect the ACC event to be of high interest among CVD specialists and investors. 

Amarin Remains an Attractive Take-Over Candidate: Given the high efficacy of Vascepa in the treatment of CVD patients, Amarin continues to be one of the most highly attractive take-over candidates in the pharmaceutical world. Management’s confidence on today’s call appears to be linked to a stronger than expected response to Vascepa among doctors since its block-buster trial results were announced last September. For details about our outlook on Amarin, please refer to our deep-dive report published last month: Amarin–2019’s Biggest Buyout Target for Big Pharma

3. Hargreaves Lansdown (HL/:LN) No Flow, No Go

The political decision to exit the European Union has unpredictable negative consequences for both the UK economy and stockmarket.  A tough market background and Brexit concerns have reduced in-flows into Wealth and Investment Management companies. This growth hiatus could last for some time.  

Hargreaves Lansdown: What does it do ?

Hargreaves Lansdown is a wealth manager and private client stockbroker with a market value of  GBP8bn. It provides the UK’s largest direct to investor platform administering £86bn of investments for more than 1.1m active clients

Why is it in the Short portfolio ?

Interim figures for the 6 months to December 2018, (published 29th Jan)  mark a deterioration in operating performance brought about by adverse market conditions. Assets under administration declined and net new business was 25% down on the prior year. Earnings per share increased 4%. The share price declined 6% on the day of the results but has subsequently been stable leaving the group on a forward multiple of over 30x. Unless the retail investment market recovers quickly this premium rating may prove vulnerable. 

4. Dhanlaxmi Bank- Free from the PCA Stranglehold

Dhanlaxmi Bank (DHLBK IN) share price has surged by 10% today on the back of RBI move to take it out of Prompt Corrective Action (PCA) following improvement in its financial ratios. We have mentioned in our earlier reports (please click here, here and here) about the helplessness of the bank as it couldn’t lend due to restrictions from RBI.

Now as the grip is loosened, Dhanlaxmi can resume lending activities and improve its financial ratios without adding any new capital in the near term.

We analyze the implications post PCA through this report.

5. AMD. Market Share Gains Across The Board As Intel Vows To Fight To Protect Its Position

Some two years on from the initial launch of products designed around their new Zen-based architecture, Advanced Micro Devices is finally gaining meaningful traction in terms of market share gains. In Q4 2018, AMD gained market share in desktop, mobile, and server sequentially and year over year – the fourth straight quarter of gains in all segments as well as their highest market shares across all segments in almost five years. Perhaps the most significant accomplishment was in server where AMD’s share doubled QoQ to 3.2%, according to data supplied by Mercury Research.

As you might expect, Intel is taking notice, acknowledging the competitive environment on its latest earnings call and vowing to fight to protect its position. In light of the 25-30% reduction in the price of Intel’s latest and highest end desktop processors on leading German online retailer MindFactory since their launch last October, it would appear that Intel’s battle tactics include sacrificing ASPs where it deems fit.  

In this briefing:

1. Amarin Q4 2018 Conference Call–Strong Sales & High Confidence
2. Hargreaves Lansdown (HL/:LN) No Flow, No Go
3. Dhanlaxmi Bank- Free from the PCA Stranglehold
4. AMD. Market Share Gains Across The Board As Intel Vows To Fight To Protect Its Position
5. Autohome (ATHM): Promising Auto Loan, Waiting for Buying Opportunity

1. Amarin Q4 2018 Conference Call–Strong Sales & High Confidence

Q4 2018 Revenues Stronger Than Pre-Announcement on January 4th: Amarin released its Q4 2018 results today and held a conference call. Results of $77m in sales (+44% YoY), were stronger than the January 4th pre-announced range of $72m and $76m.  2019 revenue guidance of 50% growth to $350m was left unchanged, but management sounded very confident on the conference call (see details below). 

Q1 2019 Revenue Growth Appears Stronger than Expected: On the conference call, Amarin was asked whether Q1 revenues were tracking the prescription data, which indicates +50% YoY growth so far. Management said that sales looked about the same, despite revenues tending not to track prescriptions that closely in Q1 normally.   

FDA May Fast-Track Vascepa Label Expansion: While Amarin’s CEO, John Thero, is usually very conservative with guidance, today he explored the possibilities of fast-track treatment by the FDA for Vascepa’s label expansion for the first time. Amarin is still on course to file for this with the FDA by March-end. Fast-track treatment by the FDA would speed up the approval process to 6 months, versus 10 months, and if favorable, could have significant upside impact on 2019 revenues. 

Approval for Vascepa in Europe to be Sought This Year: Amarin disclosed for the first time that it would seek approval for Vascepa in Europe this year. This is highly significant because the cardiovascular disease (CVD) patient population is 22% higher than the US. Amarin confirmed that FDA approval for label expansion would speed up the approval process in Europe. 

Next Catalyst is the ACC Conference on March 18th: Amarin will be announcing “late-breaking” data from the Reduce-It clinical trial at the American College of Cardiology on March 18th. Because the Reduce-It trial results themselves were so powerful, we expect the ACC event to be of high interest among CVD specialists and investors. 

Amarin Remains an Attractive Take-Over Candidate: Given the high efficacy of Vascepa in the treatment of CVD patients, Amarin continues to be one of the most highly attractive take-over candidates in the pharmaceutical world. Management’s confidence on today’s call appears to be linked to a stronger than expected response to Vascepa among doctors since its block-buster trial results were announced last September. For details about our outlook on Amarin, please refer to our deep-dive report published last month: Amarin–2019’s Biggest Buyout Target for Big Pharma

2. Hargreaves Lansdown (HL/:LN) No Flow, No Go

The political decision to exit the European Union has unpredictable negative consequences for both the UK economy and stockmarket.  A tough market background and Brexit concerns have reduced in-flows into Wealth and Investment Management companies. This growth hiatus could last for some time.  

Hargreaves Lansdown: What does it do ?

Hargreaves Lansdown is a wealth manager and private client stockbroker with a market value of  GBP8bn. It provides the UK’s largest direct to investor platform administering £86bn of investments for more than 1.1m active clients

Why is it in the Short portfolio ?

Interim figures for the 6 months to December 2018, (published 29th Jan)  mark a deterioration in operating performance brought about by adverse market conditions. Assets under administration declined and net new business was 25% down on the prior year. Earnings per share increased 4%. The share price declined 6% on the day of the results but has subsequently been stable leaving the group on a forward multiple of over 30x. Unless the retail investment market recovers quickly this premium rating may prove vulnerable. 

3. Dhanlaxmi Bank- Free from the PCA Stranglehold

Dhanlaxmi Bank (DHLBK IN) share price has surged by 10% today on the back of RBI move to take it out of Prompt Corrective Action (PCA) following improvement in its financial ratios. We have mentioned in our earlier reports (please click here, here and here) about the helplessness of the bank as it couldn’t lend due to restrictions from RBI.

Now as the grip is loosened, Dhanlaxmi can resume lending activities and improve its financial ratios without adding any new capital in the near term.

We analyze the implications post PCA through this report.

4. AMD. Market Share Gains Across The Board As Intel Vows To Fight To Protect Its Position

Some two years on from the initial launch of products designed around their new Zen-based architecture, Advanced Micro Devices is finally gaining meaningful traction in terms of market share gains. In Q4 2018, AMD gained market share in desktop, mobile, and server sequentially and year over year – the fourth straight quarter of gains in all segments as well as their highest market shares across all segments in almost five years. Perhaps the most significant accomplishment was in server where AMD’s share doubled QoQ to 3.2%, according to data supplied by Mercury Research.

As you might expect, Intel is taking notice, acknowledging the competitive environment on its latest earnings call and vowing to fight to protect its position. In light of the 25-30% reduction in the price of Intel’s latest and highest end desktop processors on leading German online retailer MindFactory since their launch last October, it would appear that Intel’s battle tactics include sacrificing ASPs where it deems fit.  

5. Autohome (ATHM): Promising Auto Loan, Waiting for Buying Opportunity

• The 4Q2018 results suggest that it is a right decision to close out direct automobile sales and start auto loan.
• The 4Q2018 results also suggest that ATHM has successfully completed the post-acquisition integration after three years.
• Peer companies’P/E ratios suggest ATHM is fairly valued, but we believe it will be a good opportunity to accumulate if the stock price falls.

In this briefing:

1. Coromandel International: Doing the Fieldwork Before the Harvest.
2. HKT Benefits from Price Increases and Offers Strong Dividend Support.
3. PRM: Thai Largest Tanker Fleets Assured of Consistent Growth
4. AEM Holdings: FY18 Results Solid; Decent FY19 Outlook; Upside Could Come from Huawei and Novoflex
5. IPO Stalker: SISB’s Growth Plans

1. Coromandel International: Doing the Fieldwork Before the Harvest.

Coromandel International (CRIN IN) is an agri-solutions company that is the 5^th largest Agro-chemical company in the country. It is India’s largest private sector Phosphatic fertilizer company, India’s largest Single Super Phosphate (SSP) company, and India’s largest organic manure company. It is India’s fourth largest agro-chemical manufacturer and has an R&D base to create and refine its product offerings as well as a retail chain with over 800 stores to act as a one-stop-solution for farmers.

Key Growth Drivers:

• Strong Agri growth levers are driven by population growth, governmental policies, Indian soil composition, and nutrient deficiency. 
• Crop Protection segment has a growing export market as well as expiring agro-chemical patents present new market opportunities.
• Branding as well as a growing retail chain fuel growth in the domestic markets. 

Valuation:

Earnings Per Share is 22.57 in FY 17-18, 24.75 in FY 18-19E and 29 in FY 19-20E. P/E ratio is 23.33 in FY 17-18, 21 in FY 18-19E and 20.5 in FY 19-20E. EV/EBITDA is 13.69 in FY 17-18, 14.38 in FY 18-19E and 15.09 in FY 19-20E. The company is fairly valued given a high growth outlook, improving efficiencies and future market potential.

2. HKT Benefits from Price Increases and Offers Strong Dividend Support.

HKT (6823 HK) reported 2H18 EBITDA slightly below our estimates but free cash flow was in line and allowed a 5% increase in the dividend (to a 5.7% yield). We look for the dividend to grow gradually going forward as management’s focus is once again on returns. We saw that with the move by HKT to raise prices in September 2018 which is already helping mobile top-line trends.

Despite HKBN (1310 HK) and China Mobile HK not following, the pre-paid segment does not appear to be suffering. Management has not ruled out further tariff increases, and they clearly want to see more rational competition in the run up to 5G (and to allow for dividend growth).

Growing cash flow has allowed management to maintain an attractive dividend policy which we see as supportive for the group overall. The improved monetization in mobile and continued efficiencies is likely to support future cash flow growth. Given the encouraging mobile outlook we have lifted our target slightly HKD13.8 from HKD13.6), and maintain a BUY on the stock. For a discussion on parent PCCW (8 HK) and the stub trade, please see David Blennerhassett ‘s recent note: StubWorld: PCCW Is “Cheap” but Stub Ops Are Deteriorating.

3. PRM: Thai Largest Tanker Fleets Assured of Consistent Growth

We initiate coverage of PRM with a BUY rating, based on a target price of Bt7.70, derived from a PEG ratio of 0.9x, which is the average for the Asia ex-japan transportation sector, implying 22.0x PE’19E.

The story:

• Secured revenue from domestic trading business
• IMO 2020 implementation to propel floating storage demand
• Recovery in T/C rate should prompt international trading turnaround

Risks:  Lower-than-expected domestic oil consumption and trading activities in ASEAN, foreign currency and fuel cost fluctuations

4. AEM Holdings: FY18 Results Solid; Decent FY19 Outlook; Upside Could Come from Huawei and Novoflex

Aem Holdings (AEM SP) reported solid FY18 results and gave a decent outlook for FY19. Customer concentration remains high (85%+ of revenues linked to one of biggest IT companies globally) but new growth opportunities with Huawei and Novoflex could potentially add meaningfully to earnings and customer diversification as of FY20.

The balance sheet remains strong (58M SGD net cash) and should be further utilized for M&A to complement the current product offering.

Given the large change in the shareholder register over the past twelve months (after Novo Tellus distributed the shares to its LPs) free float is now 83% with Aberdeen and UBS among the largest shareholders. The high free float and low market cap make AEM a prime takeover candidate the coming 2-3 years.

Fair Value of 2.1 SGD remains unchanged (based on just 2x revenue or 10x FY2020 EV/EBITDA).

5. IPO Stalker: SISB’s Growth Plans

SISB has been one of the best investments in our portfolio, rising 26% since we jumped in shortly after the IPO. Founder Kelvin Koh reiterated the strengths in his prospectus (English-Chinese language, affordability, own brand) and backs it up with:

• positive stats and trends. 7.8% CAGR in international students, growth in high net worth Thais (11.4% CAGR) and expat population (6.9% CAGR) all of which are supportive of the business.
• expansion plans both abroad and domestic. A Bt70m investment in the Thonburi site as well as talks to potentially set up new campuses in China and/or CLMV region.
• Financials. An almost sixfold jump in earnings from Bt18m in 2017 to Bt103.5m in 2018 primarily due to its high operating leverage and now debt-free status after the IPO.
• favorable operating environment. High availability of Caucasian teachers in Thailand and growing Chinese expat community due to China’s increasing environment.

In this briefing:

1. Hargreaves Lansdown (HL/:LN) No Flow, No Go
2. Dhanlaxmi Bank- Free from the PCA Stranglehold
3. AMD. Market Share Gains Across The Board As Intel Vows To Fight To Protect Its Position
4. Autohome (ATHM): Promising Auto Loan, Waiting for Buying Opportunity
5. Procurri: Exit DeClout, Enter Novo Tellus. Company Remains Highly Undervalued at 4.4x 2018 EV/EBITDA

1. Hargreaves Lansdown (HL/:LN) No Flow, No Go

The political decision to exit the European Union has unpredictable negative consequences for both the UK economy and stockmarket.  A tough market background and Brexit concerns have reduced in-flows into Wealth and Investment Management companies. This growth hiatus could last for some time.  

Hargreaves Lansdown: What does it do ?

Hargreaves Lansdown is a wealth manager and private client stockbroker with a market value of  GBP8bn. It provides the UK’s largest direct to investor platform administering £86bn of investments for more than 1.1m active clients

Why is it in the Short portfolio ?

Interim figures for the 6 months to December 2018, (published 29th Jan)  mark a deterioration in operating performance brought about by adverse market conditions. Assets under administration declined and net new business was 25% down on the prior year. Earnings per share increased 4%. The share price declined 6% on the day of the results but has subsequently been stable leaving the group on a forward multiple of over 30x. Unless the retail investment market recovers quickly this premium rating may prove vulnerable. 

2. Dhanlaxmi Bank- Free from the PCA Stranglehold

Dhanlaxmi Bank (DHLBK IN) share price has surged by 10% today on the back of RBI move to take it out of Prompt Corrective Action (PCA) following improvement in its financial ratios. We have mentioned in our earlier reports (please click here, here and here) about the helplessness of the bank as it couldn’t lend due to restrictions from RBI.

Now as the grip is loosened, Dhanlaxmi can resume lending activities and improve its financial ratios without adding any new capital in the near term.

We analyze the implications post PCA through this report.

3. AMD. Market Share Gains Across The Board As Intel Vows To Fight To Protect Its Position

Some two years on from the initial launch of products designed around their new Zen-based architecture, Advanced Micro Devices is finally gaining meaningful traction in terms of market share gains. In Q4 2018, AMD gained market share in desktop, mobile, and server sequentially and year over year – the fourth straight quarter of gains in all segments as well as their highest market shares across all segments in almost five years. Perhaps the most significant accomplishment was in server where AMD’s share doubled QoQ to 3.2%, according to data supplied by Mercury Research.

As you might expect, Intel is taking notice, acknowledging the competitive environment on its latest earnings call and vowing to fight to protect its position. In light of the 25-30% reduction in the price of Intel’s latest and highest end desktop processors on leading German online retailer MindFactory since their launch last October, it would appear that Intel’s battle tactics include sacrificing ASPs where it deems fit.  

4. Autohome (ATHM): Promising Auto Loan, Waiting for Buying Opportunity

• The 4Q2018 results suggest that it is a right decision to close out direct automobile sales and start auto loan.
• The 4Q2018 results also suggest that ATHM has successfully completed the post-acquisition integration after three years.
• Peer companies’P/E ratios suggest ATHM is fairly valued, but we believe it will be a good opportunity to accumulate if the stock price falls.

5. Procurri: Exit DeClout, Enter Novo Tellus. Company Remains Highly Undervalued at 4.4x 2018 EV/EBITDA

Procurri Corporation (PROC SP) released FY18 results which showed the company growing revenues to 220M SGD (+21% vs FY17), EBITDA to 19.7M SGD (+185% vs FY17), PBT to 10.1M SGD (vs 2.3M loss in 2017) and a small net profit of 5.3M SGD which was artificially low because of an astronomical 47% tax rate. The high tax rate should reverse in 2H19 which would show the reported profitability of Procurri improve substantially. 

Procurri remains deep value trading at just 4.4x 2018 EV/EBITDA and 0.4x 2018 EV/Sales. If we adjust the FY18 net profit figure(assume 30% tax rate vs 47%) the shares trade at a P/E multiple of just 13x.

The shareholder register of Procurri has seen a dramatic change YTD with multiple announcements on SGX. The most significant development is the entry of Singapore PE fund Novo Tellus acquiring a 29.6% stake on 19/2/19. Consequently this means that the biggest corporate overhang on Procurri (read: the control by Declout Ltd (DLL SP) ) is now almost over with their stake reduced to 17% from 47% previously.

Given the well-publicized track record of Novo Tellus at SGX listed Aem Holdings (AEM SP) the question is if Novo Tellus sees another multi-bagger in the making?

While a “10-bagger” type return like AEM is unlikely at Procurri, doubling the market cap from 90M to 180M SGD would not be impossible as Procurri continues to grow in FY19 and the depressed multiple expands modestly.