In today’s briefing:
- Spread Trade Opportunities Arising from KQ150/KS200 Passive Flows in the Celltrion Merger
- YSB (9885.HK) – Being Included in ETF Offers a Great Escape Opportunity
- Santen Pharmaceutical (4536 JP): Strong H1 Performance; FY24 Guidance Raise; Rich Pipeline
- Headline Is Eye Catching, but the Revised Voting Criteria Do Not Affect Most Companies
- Pre-IPO Qyuns Therapeutics – Conservative About the Outlook
Spread Trade Opportunities Arising from KQ150/KS200 Passive Flows in the Celltrion Merger
- KOSDAQ 150’s passive outflow occurs on December 14th for Celltrion Healthcare, whereas it would be January 11th for Celltrion with KOSPI 200.
- The estimated passive flow size (x ADTV) on their respective rebalancing trading days is anticipated to be approximately -2.79x (Celltrion Healthcare) and +1.76x (Celltrion).
- We should monitor the potential expansion of the swap spread on December 14th. Additionally, contemplating an outright approach for Celltrion, akin to the Hanwha Ocean scenario, could be worth considering.
YSB (9885.HK) – Being Included in ETF Offers a Great Escape Opportunity
- YSB would be added to KraneShares CSI China Internet ETF.Cornerstone investors could opt to cash out directly,taking advantage of improved liquidity, which means even they’re not optimistic about YSB’s prospects.
- YSB’s profit margin is disappointing. It would be hard for YSB to deliver decent profits in the end. This business does not make money. YSB is also short of money.
- Since going public, YSB’s share price has been on a rollercoaster, which has deviated from the fundamentals, but it should be pointed out eventually stock prices will return to fundamentals.
Santen Pharmaceutical (4536 JP): Strong H1 Performance; FY24 Guidance Raise; Rich Pipeline
- Santen Pharmaceutical (4536 JP) reported double-digit growth in revenue and core operating profit, and triple-digit growth in net profit in H1FY24. Overseas business grew 30% and remained the main driver.
- Santen raised FY24 guidance for the second time due to the stronger-than-expected sales from overseas markets, reviewed impact of generics in Japan, and continued progress in company-wide cost optimizations.
- Recently, the company has received European Commission approval for a new ophthalmic drug for lowering of intraocular pressure (IOP) in open-angle glaucoma and ocular hypertension.
Headline Is Eye Catching, but the Revised Voting Criteria Do Not Affect Most Companies
- The “minimum majority of outside directors” is an eye catcher, but it does’t affect most companies because the 1/3 outside director ratio applies if a nominating committee is in place.
- Since companies with majority of independent directors are 12.1% in prime market, the objective becomes to achieve the minimum requirement (1/3 INEDs), and few companies engage in further improving practices.
- Companies with over 50% independent director have extremely superior market values in capitalization, ROE, ROA, and Tobin’s Q. Therefore, the acceleration of increasing independent director ratios should be seriously implemented.
Pre-IPO Qyuns Therapeutics – Conservative About the Outlook
- The sales scale of drugs for autoimmune diseases in China is much lower than that in overseas markets. So, internationalization is inevitable for companies in this industry.
- Qyuns’s candidates have to face fierce competition, with no advantage in R&D progress.Since Qyuns mainly do clinical trials in China, its future valuation is hard to have big expansion potential.
- Many investors may still “live in the illusion” for China biotech. We think Qyuns would not finally transform into a biopharma. Its valuation should be lower than Keymed.
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