Brief China: MabPharma (迈博医药) IPO: Assembled for a Trade? and more

In this briefing:

1. MabPharma (迈博医药) IPO: Assembled for a Trade?
2. Gold: Dovish Central Banks May Sustain Rally; Closing Our GLD Short
3. Spotify: Playbook for Online Platforms to Turn Profitable – Implications for Meituan Dianping
4. New Century Hotel Mgmt IPO Preview: Two-Speed Businesses
5. Naspers: Softbank Buyback a Guide for Naspers?

1. MabPharma (迈博医药) IPO: Assembled for a Trade?

MabPharma, backed by Chinese private equity investor CDH, is seeking to list in Hong Kong. In this insight, we will discuss the following topics:

• The company’s background
• Details of pipeline drug candidates, the potential market of these products and the competition
• Shareholders and investors
• Questions for management meetings
• Summary of our likes and concerns

We will leave the discussion of valuation for our next insight.

• CStone Pharma (基石药业) IPO: Strong Assembly and Backing (Part 1)

• Viva Biotech (维亚生物) IPO: When CRO Becomes Early Stage Biotech Investor

• Hansoh Pharma (翰森制药) IPO: Takeaways from Recent 4+7 City Centralized Tender Results

• Hansoh Pharma (翰森制药) IPO: A Leading Generic Player with Regulatory Overhang (Part 1)
• WuXi Apptec (药明康德) IPO: This A+H Listing Will Be Different

• Frontage Holding (方达控股) IPO: More Disclosure Needed to Understand Moat and Growth Prospect
• Ascentage Pharma (亚盛医药) IPO: Too Early for an IPO
• Junshi Bioscience (君实医药) IPO: Thoughts on Valuation (Part 2)
• Junshi Bioscience (君实医药) IPO: Early in Application but Behind in Key Indications (Part 1)
• CanSino Biologics (康希诺) IPO: Promising Pre-Clinical Results but Vaccine Scandal Weighs (Part 1)

• AOBiome Therapeutics IPO: Hope for Natural Therapeutic Treatment
• Stealth Biotherapeutics IPO: Cure the Symptoms but Not the Cause (Part 1)
• Innovent Biologics (信达生物) IPO: Pricing the PD-1 and Biosimilars Competition (Part 2)
• Innovent Biologics (信达生物) IPO: A Major PD-1 MAb Competitor Might Have Just Emerged (Part 1)
• MicuRx Pharma (盟科医药) IPO: Betting on Single Drug in the Not so Attractive Antibiotic Segment
• Hua Medicine (华领医药) IPO: Thoughts on Valuation
• Hua Medicine (华领医药) IPO: Reviving Roche’s Failed Attempt?
• BeiGene (百济神州) IPO: Dual-Listing with Upside Capped in the Near Term
• Ascletis Pharma (歌礼制药) IPO: Valuation Not Justified by Ganovo and Ravidasvir NPV (Part 3)
• Ascletis Pharma (歌礼制药) IPO: Three Valuation Risk Factors (Part 2)
• Ascletis Pharma (歌礼制药) IPO: Emerging Player in the Crowded HCV Drug Market
• China Isotope & Radiation IPO: Oligopoly, Visible Growth and High Barrier to Entry
• Zai Lab IPO: Thoughts on Valuation, Risks and Upsides (Part 2)
• Zai Lab IPO: Experienced Team, Promising In-Licensing Drug Pipeline (Part 1)

2. Gold: Dovish Central Banks May Sustain Rally; Closing Our GLD Short

Central banks around the world have signaled their willingness to return back to the Easy Money Playbook in their quest to re-stimulate economic growth and inflation. This significant shift in market expectations has been the key factor driving the recent rally in Gold (GOLD COMDTY) prices, and it appears to have legs.  As such, we are closing our Spdr Gold Shares (GLD US) short.

3. Spotify: Playbook for Online Platforms to Turn Profitable – Implications for Meituan Dianping

• Our analysis of how Spotify Technology Sa (SPOT US) turned profitable in 4Q18 reveals three key ingredients: critical mass in sales, GM progression, and core business diversification.
• With sales reaching critical mass, this would allow fixed costs to be spread out in such a way that opex/unit is lower than GP/unit.
• Progression in GM and core business diversification strategy are worth monitoring.
• Implication: Meituan Dianping’s (3690 HK) core business is ahead of iQIYI Inc (IQ US) in terms of profitability inflection point timeline.

4. New Century Hotel Mgmt IPO Preview: Two-Speed Businesses

Zhejiang New Century Hotel Management Group (ZHEKAIH HK)  is a leading hotel group in China engaged in the operation and management of mid-scale and upscale hotel chains. New Century has started pre-marketing for a Hong Kong IPO to raise up to $200 million, according to press reports.

5. Naspers: Softbank Buyback a Guide for Naspers?

Recently, Softbank’s (9984 JP) shares jumped +18% after announcing a $5.5bn share buyback. Using Smartkarma’s holdco monitor, the discount to NAV had widened to around 55% prior to the announcement but is now sitting around 40-45%. There were a few key reasons for the buyback: (1) the Softbank Corp (9434 JP) (KK) IPO netted $20bn, giving the company the flexibility to do the buyback, and (2) Softbank is taking a more disciplined approach to further platform investments.

Both these arguments are also available to Naspers (NPN SJ) management and a move to buy back 5% of market cap is feasible and we believe would narrow the discount. The question is whether management are listening. They have been dismissive of buybacks in the past but this could change.