Daily Brief Equity Bottom-Up: Asia Gaming: Nagacorp’s Results Show Strong Covid Rebound Underway but Shares Still Undervalued and more

• Nagacorp’s 1Q23 and full year 2022 results confirm our prior call that Nagacorp revenues would ramp faster back to baseline 2019 than the market anticipates.
• Trading at HKD$5.97 with a forward P/E of 13.18 makes the stock attractive early in the recovery cycle and headed higher as 1Q23 results indicate.
• Superior management has always been a strength of Nagacorp. It has been recognized by Institutional Investor as Asia’s #1 most honored company for investor relations and returns.

• Taiwan ADR premiums have continued to decline; a long holiday in Taiwan has opened up some rare opportunities given U.S. markets kept trading.
• UMC ADR’s are trading at a rare relatively deep discount and represent an opportunity.
• ChipMOS ADRs are also trading a rare relatively deep discount and are another opportunity to long the ADR spread.

• While we like Sinotrans (598 HK) in the long term, we are caution that 1Q23 result may be disappointing. Its 4Q22 earnings already showed 49.1% YoY and 73.3% QoQ decline.
• Indicators including China’s PMI new export orders, export growth, container shipping freight rates (SCFI) and airfreight rates all showed that the recovery trend is weak. 
• 9% of FY22 profit is from exchange gain as Rmb depreciated, and this may not happen again. Consensus forecast of just 10% decline in FY23 net profit seems overly optimistic. 

Paradigm has announced day 168 (six-month) data from the PARA_OA_008 trial, which is evaluating injectable pentosan polysulfate sodium (iPPS) as a potentially disease-modifying treatment for knee osteoarthritis (kOA). Highlights from the interim data include: structural changes in several disease features as measured by magnetic resonance imaging (MRI), potential support for disease-modifying OA drug (DMOAD) activity from trends in biomarker data, and persistent positive responses in WOMAC scores. During the second half of CY23, Paradigm intends to discuss with the FDA and EMA a potential regulatory pathway for DMOAD indication labelling; we believe that the outcome, along with clarification on the Phase III development pathway, could represent a significant catalyst for the company.

• JD Health’s 2022 results were more optimistic than expected. We think the past three-year pandemic as well as the broadening of service scenarios are main drivers for rapid performance/user growth.
• If turning losses into profits is “a phased victory”,striving for higher profit margins and healthier revenue structure is the key task in next stage,but JD Health may fail this transformation. 
• After China reopens, JD Health’s user scale could be difficult to maintain such rapid growth in 2023 and onwards. Without breakthrough in service revenue, its valuation expansion potential could be limited. 

• Pegavision Corp (6491 TT) has started 2023 on a weak note. During 1Q23, the company recorded revenue of NT$1,460M, representing YoY decline of ~2% and QoQ decline of ~18%.
• During January and February 2023, Pegavision’s Chairman, Guo Ming-Dong has sold 53K and 66K shares, respectively, thereby reducing his shareholding to ~1.57M from initial ~1.9M.
• Disappointing monthly revenue, coupled with regular insider selling should limit the near-term upside potential of Pegavision. Since end of February, Pegavision shares have corrected 10%.

Light Science Technologies Holdings has conditionally raised £1.5m (gross) through a placing and private subscription at 1p/share. The company also intends to raise up to £0.5m (gross) at 1p/share via the Winterflood Retail Access platform. The proceeds will predominantly be used for product development and intellectual property protection in the company’s controlled environment agriculture (CEA) division, as well as for general working capital purposes.

Immix Biopharma’s FY22 results reflected a busy period as management ramped up clinical activity across multiple programs. In a major development, Immix expanded its portfolio with the in-licensing of NXC-201, an autologous CAR-T therapy being investigated for the treatment of multiple myeloma (MM) and AL amyloidosis (ALA) currently in the ongoing Phase I/II NEXICART-1 study. With the increase in R&D activity primarily associated with in-licensing NXC-201, Immix reported an operating loss of $8.2m in FY22 (FY21: $1.4m) and we estimate that its net cash position of $13.4m at end-December 2022 provides a cash runway into Q423. Given the company’s increased disclosure of its arrangement with the licensors and of future NEXICART-I study costs, as well as its communicated strategy to expand clinical studies in the US, we now include NXC-201 in our valuation. We value Immix at $77.1m or $5.5 per share (previously $61.5m or $4.4 per share).

Utilico Emerging Markets Trust’s (UEM’s) manager Charles Jillings, at value-focused ICM Group, is excited about the prospects for the trust as he strongly believes that the operational strength of investee companies is not reflected in their current share prices. He has good visibility into the businesses in UEM’s portfolio, and a recent trip to Latin America reinforced his view that their management teams are taking advantage of available growth opportunities. Jillings and his team are making a dedicated effort to introduce UEM to a wider audience, including retail investors, via a greater number of presentations and an active social media presence. Up to 10% of the portfolio may be held in unlisted securities, which includes top 10 holding Petalite, whose recent revaluation has led to a meaningful uplift in UEM’s NAV.

• GTX updated its annual outlook by forecasting results would be towards the high end of the previous guidance range.
• GTX also highlighted the opportunity to force the conversion of the Series A Preferred stock by the middle of the year.
• GTX had previously issued a sales outlook of $3.55 billion to $3.85 billion and adjusted EBITDA of $555 million to $615 million