In today’s briefing:
- Samsung Biologics: Rights Offering of 3 Trillion Won to Acquire Remaining Stake in Samsung Bioepsis
- Overearning Short Candidates: Groupon, Dick’s Sporting, Dillards, Johnson & Johnson
- Pre-IPO Shanghai NewMed Medical – Concerns on Fierce Competition and Future Commercialization
Samsung Biologics: Rights Offering of 3 Trillion Won to Acquire Remaining Stake in Samsung Bioepsis
- We have a Negative view on this nearly 3 trillion won rights offering by Samsung Biologics.
- The expected price of the rights offering is 599,000 won which is 18.9% below current share price and would represent about 7% shares dilution.
- Despite the long-term positive prospects of consolidating results from Samsung Bioepsis, we believe the acquisition price was a bit too high at more than 100% higher than Biogen’s valuation multiples.
Overearning Short Candidates: Groupon, Dick’s Sporting, Dillards, Johnson & Johnson
- This model seeks companies that are potentially “overearning”, defined as companies with unusually high margins relative to their own history or relative to the industry.
- The reasons for the margin increases are sometimes unsustainable or fraudulent. The critical judgement involves to what extent unsustainable margins are embedded in a company’s forecasts and/or the stock’s valuation.
- These shorts tend to have moderate to higher betas, higher valuations due to recent strong results and good short responses to subsequently disappointing earnings.
Pre-IPO Shanghai NewMed Medical – Concerns on Fierce Competition and Future Commercialization
- From Shanghai NewMed Medical (NMM HK)’s pipeline, it can be seen that almost all the candidates do not have obvious advantages in development progress in front of the competing products.
- NewMed has little experience in launching and commercializing product candidates, especially as a late-comer. So, the actual commercialization performance could be lower than expected.
- Since there are so many uncertainties as well as the poor market sentiment for new IPOs in HKEX, we are conservative about the outlook of NewMed at the current stage.
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