In today’s briefing:
- Giant Biogene IPO: The Bear Case
- SillaJen Trade Resumption: Day Trading Setup Betting on Shooting Star Pattern
- Rainbow Children’s Hospital (RAINBOW IN): Flying High Backed by Niche Focus and Business Recovery
- Pre-IPO Giant Biogene – The Strength and the Concerns
- OMI update
Giant Biogene IPO: The Bear Case
- Giant Biogene Holding (GBH HK), a leading professional skin care product manufacturer, has started pre-marketing a US$500 million HKEx IPO.
- In Giant Biogene IPO: The Bull Case, we highlighted the key elements of the bull case. In this note, we outline the bear case.
- The key elements of the bear case rest on a worrying performance of Collgene (the second flagship brand), an inexorable rise in S&M expenses and margins on a downward trajectory.
SillaJen Trade Resumption: Day Trading Setup Betting on Shooting Star Pattern
- We should pay attention to two significant flows. INFLOW: Covering of those holding short positions & OUTFLOW: Rebalancing of local PASSIVEs that failed to remove SillaJen.
- Osstem, which was in a similar situation, showed this shooting star pattern on its trade resumption day. Of course, this setup will work limitedly because SillaJen is shorting-restricted.
- Nevertheless, SillaJen will likely show this pattern more dramatically in the shooting phase as its short interest is more than three times that of Osstem.
Rainbow Children’s Hospital (RAINBOW IN): Flying High Backed by Niche Focus and Business Recovery
- Rainbow Children’s Hospital (RAINBOW IN) is India’s largest pediatric multi-specialty healthcare chain, operating 15 hospitals and 3 clinics in 6 cities, with a total bed capacity of 1,550+.
- Due to its presence in the affluent cities of India, the company has superior ARPOB. With the normalization of business occupancy and outpatient volume improved significantly.
- The company plans to add 100 beds by the end of FY23. Higher occupancy and greater scale of operation are the biggest margin driver for the company.
Pre-IPO Giant Biogene – The Strength and the Concerns
- The strength about Giant Biogene is that the founders have R&D background, which helps build trust. Meanwhile, the financial performance was good, with three years of consistent high margins.
- The sustainability of high-profit model will face pressure due to increasing competition. The establishment of long-term core competitiveness and second growth point is important. Complex related-party transaction is another concern.
- Giant Biogene is in an industry that has a large potential for future growth in valuation. Its valuation should be lower than that of Bloomage and Imeik.
OMI update
It looks to me that the company is now run-rating to $500M of EBITDA, but it is possible that it is much lower depending on how Q3 turn out.
It was very possible that things were fine for the first 2 months of Q3 and then got really bad thereafter and so the run-rate EBITDA is actually much lower…but let’s just use $500M as our base case
Capex in this business is really closer to Opex. Apria is really a leasing/distribution business and so Capex is needed to keep the business running.
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