Quality-Value Investing

Marc Melendez, CFA

Emerging Market Small and Mid Cap Equities

Reperio Capital

Reperio Capital Research was founded in 2013 with the goal of better serving the investment community with in-depth, high quality, value oriented research.

Reperio means to discover in latin. Using value investing principles, we aim to discover a minimum of 12 investment opportunities per year within the Emerging Markets Small and Mid Cap universe.

We take a business owners perspective with a long term investment horizon. We conduct bottom up, fundamental research. We focus on downside risks and require a significant margin of safety in any investment to prevent the permanent loss of capital. All factors differentiating our research from the short term, trading focus of traditional research providers.

Equity Bottom-Up

<a href="https://www.smartkarma.com/entities/ssy-group-ltd" target="_blank" data-smartkarma-citation="entities:7799:1" rel="noopener">SSY Group Ltd (2005 HK)</a> is a manufacturer of intravenous solutions in China. Since 2007, its intravenous solutions revenue grew by 22.1% per year. In H1 2020, as a result of the pandemic, hospital admissions fell and the demand for IVs dropped causing the company’s sales to decline by 23.3% year-on-year. As the pandemic passes and hospital admissions normalize IV sales should normalize
Prior to the pandemic, the IV market was expected to grow by 8.4% per year. SSY should be able to grow faster than the market as it expands its distribution network. There are also economies of scale that will allow it to take share from smaller players. The company's growth trajectory is returning with Q3 2020 sales increasing by 12% YoY.
With SSY’s share price down 50% from its peak of HKD9.46, there is limited downside. There is 9% downside to the bear case, 81% upside to the base case, and 260% upside to the bull case. 
Despite its problems being temporary, its potential growth rates, strong competitive position, and good management team, SSY  trades on an EV/2019 EBIT of 12.6 times. At its peak valuation in June 2018, the market valued the company at 27.9 times its trailing twelve month EBIT.
SSY is a very attractive opportunity with a very strong chance of doubling your money over the next three years as the company’s temporary issues should be resolved within the next year or two.

SSY Group Ltd (2005 HK) is a manufacturer of intravenous solutions in China. Since 2007, its intravenous solutions revenue grew by 22.1% per year. In H1 2020, as a result of the pandemic, hospital admissions fell and the demand for IVs dropped causing the company’s sales to decline by 23.3% year-on-year. As the pandemic passes and hospital admissions normalize IV sales should normalize
Prior to the pandemic, the IV market was expected to grow by 8.4% per year. SSY should be able to grow faster than the market as it expands its distribution network. There are also economies of scale that will allow it to take share from smaller players. The company's growth trajectory is returning with Q3 2020 sales increasing by 12% YoY.
With SSY’s share price down 50% from its peak of HKD9.46, there is limited downside. There is 9% downside to the bear case, 81% upside to the base case, and 260% upside to the bull case. 
Despite its problems being temporary, its potential growth rates, strong competitive position, and good management team, SSY  trades on an EV/2019 EBIT of 12.6 times. At its peak valuation in June 2018, the market valued the company at 27.9 times its trailing twelve month EBIT.
SSY is a very attractive opportunity with a very strong chance of doubling your money over the next three years as the company’s temporary issues should be resolved within the next year or two.

China Resources Dubl Crne Phrmctl (600062 CH)

SSY Group- A Chinese IV Bag Manufacturer Facing Short Term Issues, but Strong Long Term Outlook