In today’s briefing:
- Henlius (2696 HK): NDRC Approval Should Calm Nerves
- Henlius (2696 HK): The Spread Should Narrow After NDRC Approval
- China Healthcare Weekly (Nov.24) – 10th VBP, Biotech Valuation Logic, China Resources Reorganization
- Jiangxi Rimag Group Lock-Up Expiry: Cornerstone Investor May Sell Shares After 200%+ Post-IPO Gains
- UMP Healthcare (722 HK): Postcard From Hong Kong and Webinar Updates
Henlius (2696 HK): NDRC Approval Should Calm Nerves
- Due to several factors, the gross spread of Shanghai Fosun Pharmaceutical (Group) (2196 HK)’s HK$24.60 offer for Shanghai Henlius Biotech (2696 HK) has widened to 21.5%.
- The wide gross spread reflects the China TCM deal break hangover, slow progress in satisfying the precondition, Fosun Pharma’s potential funding challenges, and the shareholder vote.
- NDRC approval should calm nerves about precondition satisfaction. Even with lingering deal-break concerns, a 21.5% gross spread is excessive.
Henlius (2696 HK): The Spread Should Narrow After NDRC Approval
- On the 24th June, Fosun Pharmaceutical (2196 HK) made a HK$24.60/share Offer, in cash, for H-shares not held in Shanghai Henlius Biotech (2696 HK). A scrip alternative was subsequently afforded.
- This is a pre-conditional Offer, subject to NDRC, Mofcom and SAFE – followed by a Scheme-like vote for independent H-shareholders. Henlius has announced that NDRC approval has now been secured.
- Trading at a massive gross spread of ~21.5% compared to ~10% just prior to China Traditional Chinese Medicine (570 HK)‘s capitulation. This is excessive.
China Healthcare Weekly (Nov.24) – 10th VBP, Biotech Valuation Logic, China Resources Reorganization
- The 10th national VBP officially begins. Enterprises involved in this VBP include Shanghai Fosun Pharmaceutical (2196 HK)Shanghai Pharmaceuticals (2607 HK), Sichuan Kelun Pharmaceutical (002422 CH), CSPC (1093 HK), etc..
- We analyzed Chinese Biotech companies’ P/S range based on different product revenue growth. Due to low profitability, there is “a valuation discount” if they are included in global valuation system.
- KPC has agreed to acquire 51% interest in CR Shenghuo from CR Sanjiu. Due to good performance, we are full of expectations for the future acquisition/integration within China Resources.
Jiangxi Rimag Group Lock-Up Expiry: Cornerstone Investor May Sell Shares After 200%+ Post-IPO Gains
- Shares of Jiangxi Rimag Group, a medical group with focus on medical imaging in China, rose 200%+ since IPO and massively outperformed Hang Seng Index.
- A Nanchang-based medical imaging center operator priced its IPO at HK$14.98/share and raised ~HK$183M in June. Cornerstone investors have agreed to acquire ~8M H shares.
- I expect key cornerstone investor may sell shares after 200%+ post-IPO gains as early lock-up period will end on December 6th, 2024.
UMP Healthcare (722 HK): Postcard From Hong Kong and Webinar Updates
- We met with UMP Healthcare (722 HK) in Hong Kong. We believe management’s cost control initiatives are bearing fruit and will see an inflection in earnings in FY25.
- The weak consumption sentiment is setting a landscape for asset disposals, such as EC Healthcare (2138 HK) ‘s 436 mn HKD disposal of medical imaging to AIA.
- We believe the company is a multi-bagger trading at 6.8x PE FY25e. It has ~80% of its market cap in cash (260+ mn HKD) and a ~10% dividend yield.
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