In today’s briefing:
- Merger Arb Mondays (01 Jul) – Henlius, China TCM, GA Pack, CPMC, Asia Cement, Great Eastern
- China Healthcare Weekly (Jun.30) – TCM Companies Witness Soaring Costs, Rising Stars in ADC, 1515.HK
- Another Debt Downgrade
- Shenyang Xingqi Pharmaceutical (300573.CH)-Looking Forward to a Leap in Valuation and Rich Dividends
- Clinica Baviera ($CBAV) – Seeing Beyond
Merger Arb Mondays (01 Jul) – Henlius, China TCM, GA Pack, CPMC, Asia Cement, Great Eastern
- We summarise the latest spreads and newsflow of merger arb situations we cover across Hong Kong, Australia, New Zealand, Singapore, Japan, Indonesia, Malaysia, Philippines, Thailand and Chinese ADRs.
- Highest spreads: Yichang HEC Changjiang Pharma (1558 HK), China Traditional Chinese Medicine (570 HK), Hollysys Automation Technologies (HOLI US), Ansarada Group Ltd (AND AU), Asia Cement China (743 HK).
- Lowest spreads: Fancl Corp (4921 JP), Great Eastern Holdings (GE SP), Tatsuta Electric Wire & Cable (5809 JP), Infocom Corp (4348 JP), Kfc Holdings Japan (9873 JP).
China Healthcare Weekly (Jun.30) – TCM Companies Witness Soaring Costs, Rising Stars in ADC, 1515.HK
- Investors should be aware of the increasing prices of TCM raw materials, which could lead to fluctuations in profit margins of TCM companies. Investors should prepare for these potential impacts.
- After years of “fast-follow”, we’ve finally seen products from Chinese pharmaceutical companies stand at the center of the stage for the first time in the new generation of ADC.
- China Resources Medical’s profitability outlook is not promising due to issues within the Chinese healthcare system. The bottom line is P/B above 1 and P/E above 10x.
Another Debt Downgrade
- Moody’s Ratings downgraded Grifols’ corporate family rating to B3 from B2, with a stable outlook, due to high leverage, and complex, opaque corporate governance involving related-party transactions.
- Moody’s considers Grifols’s liquidity to still be “fragile,” noting that “while adequate for the next 12 months, beyond that, maintaining adequate liquidity will depend on returning to positive FCF generation.
- For risk-tolerant investors, the current low share price could present a long-term buying opportunity if Grifols successfully executes its strategic initiatives.
Shenyang Xingqi Pharmaceutical (300573.CH)-Looking Forward to a Leap in Valuation and Rich Dividends
- Xingqi’s 0.01% atropine sulfate eye drops got approved for marketing this March, which is expected to monopolize the domestic market for at least 2.5-3 years, and enjoy higher gross margin.
- Peak sales of 0.01% atropine sulfate eye drops would reach RMB5 billion at least. Together with other products, Xingqi’s total revenue would reach at least RMB6 billion in the future.
- Due to attractive dividend policy, this stock is worth holding for the long term.Xingqi’s market value could even reach RMB50 billion if the sales exclusivity period is longer than expected.
Clinica Baviera ($CBAV) – Seeing Beyond
- Introduction Clínica Baviera is an ophthalmology group founded in 1992 in Spain by Eduardo Baviera (current CEO) and other members of Baviera´s family and friends.
- It specializes in refractive surgeries like LASIK, cataract surgeries, and treatments for various eye conditions as myopia, hyperopia, and astigmatism.
- The company focus on services that are not covered by public health systems such as surgeries to correct the need for glasses or contact lenses.
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