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.

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

Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

Consun Pharma has managed to book a double-digit growth in revenue and earnings, 47.2% and 23.2% respectively; thanks to the sales growth of 13.8% Y-o-Y in Uremic Clearance Granule (UCG) and integrating Guangxi Yulin Pharmaceutical into Consun’s.The company also plans to carry out the development of new products to increase their foothold in kidney disease, venturing into imaging products, women and children healthcare, liver and gallbladder solution, skincare solution, digestive solution and a new form of the bone fixing water, in a hydrogel. All of which will set another momentum for double-digit sales growth for this coming financial year.As the share price trades at 15x PE, it is still cheaper compared to <a href="https://www.smartkarma.com/entities/8045" target="_blank">Shanghai Fosun Pharmaceutical (Group) (2196 HK)</a> at 21x, <a href="https://www.smartkarma.com/entities/16578" target="_blank" data-smartkarma-citation="entities:16578:1">China Resources Dubl Crne Phrmctl Co Ltd (600062 CH)</a>  at 22x, or <a href="https://www.smartkarma.com/entities/16359" target="_blank" data-smartkarma-citation="entities:16359:1">Northeast Pharmaceutical A (000597 CH)</a> at 198x.

Consun Pharma has managed to book a double-digit growth in revenue and earnings, 47.2% and 23.2% respectively; thanks to the sales growth of 13.8% Y-o-Y in Uremic Clearance Granule (UCG) and integrating Guangxi Yulin Pharmaceutical into Consun’s.The company also plans to carry out the development of new products to increase their foothold in kidney disease, venturing into imaging products, women and children healthcare, liver and gallbladder solution, skincare solution, digestive solution and a new form of the bone fixing water, in a hydrogel. All of which will set another momentum for double-digit sales growth for this coming financial year.As the share price trades at 15x PE, it is still cheaper compared to Shanghai Fosun Pharmaceutical (Group) (2196 HK) at 21x, China Resources Dubl Crne Phrmctl Co Ltd (600062 CH)  at 22x, or Northeast Pharmaceutical A (000597 CH) at 198x. 

Consun Pharma 2016 FY: What's in the New Concoction?

Founder

Kemp Dolliver, CFA

Cherrystone Hill Research

Equity Capital Markets

China Resources Pharmaceutical Group / Equity Capital Markets

China Resources Pharmaceutical Group (3320 HK)

This Insight follows up on our three prior Insights on the company. Here we discuss our opinion of the offering; additional details from the PHIP; and topics of discussion for the roadshow. We should note that we have not seen a pre-deal report or the roadshow presentation. You should refer to <a href="https://www.smartkarma.com/profiles/673" target="_blank" data-smartkarma-citation="accounts:673">Toh Zhen Zhou</a> 's Insight that reviews the offering using the IPO Analyzer.We are lukewarm on the offering. The company has an interesting position in the pharmaceutical value chain, but has reported only modest organic growth during the Track Record Period.  The proposed valuation appears to reflects this. There is a potential arbitrage opportunity (if in name only) at the lower end of the proposed price range to buy shares of the listed subsidiaries at a discount. <a href="https://www.smartkarma.com/profiles/673" target="_blank" data-smartkarma-citation="accounts:673">Toh Zhen Zhou</a> 's Insight discusses this in detail.

This Insight follows up on our three prior Insights on the company. Here we discuss our opinion of the offering; additional details from the PHIP; and topics of discussion for the roadshow. We should note that we have not seen a pre-deal report or the roadshow presentation. You should refer to Toh Zhen Zhou 's Insight that reviews the offering using the IPO Analyzer.We are lukewarm on the offering. The company has an interesting position in the pharmaceutical value chain, but has reported only modest organic growth during the Track Record Period.  The proposed valuation appears to reflects this. There is a potential arbitrage opportunity (if in name only) at the lower end of the proposed price range to buy shares of the listed subsidiaries at a discount. Toh Zhen Zhou 's Insight discusses this in detail. 

China Resources Pharmaceutical Group has filed an Application Proof to list on the HKEX this year, possibly in the current quarter. Our previous two Insights: <a href="https://www.smartkarma.com/insights/cr-pharma-listing-part-1" target="_blank" data-smartkarma-citation="insights:5268">CR Pharma Listing: Part 1</a>  and <a href="https://www.smartkarma.com/insights/cr-pharma-listing-part-2" target="_blank" data-smartkarma-citation="insights:5406">CR Pharma Listing: Part 2</a> discussed the company's business segments (manufacturing in Part 1, distribution and retail in Part 2). This Insight will discuss the R&amp;D pipeline and other remaining topics of interest (Use of Proceeds and recent competitors' comments). We will re-visit the subject once more details of the listing are available.

China Resources Pharmaceutical Group has filed an Application Proof to list on the HKEX this year, possibly in the current quarter. Our previous two Insights: CR Pharma Listing: Part 1  and CR Pharma Listing: Part 2 discussed the company's business segments (manufacturing in Part 1, distribution and retail in Part 2). This Insight will discuss the R&amp;D pipeline and other remaining topics of interest (Use of Proceeds and recent competitors' comments). We will re-visit the subject once more details of the listing are available.

China Resources Pharmaceutical Group has filed an Application Proof to list on the HKEX this year, possibly in the current quarter. Our initial Insight <a href="https://www.smartkarma.com/insights/cr-pharma-listing-part-1" target="_blank" data-smartkarma-citation="insights:5268">CR Pharma Listing: Part 1</a> discussed the manufacturing segment. This Insight will discuss the distribution and retail segments. Part 3 will discuss the R&amp;D pipeline and other remaining topics of interest. We will re-visit the subject once more details of the listing are available.

China Resources Pharmaceutical Group has filed an Application Proof to list on the HKEX this year, possibly in the current quarter. Our initial Insight CR Pharma Listing: Part 1 discussed the manufacturing segment. This Insight will discuss the distribution and retail segments. Part 3 will discuss the R&amp;D pipeline and other remaining topics of interest. We will re-visit the subject once more details of the listing are available. 

China

China Resources Double-Crane Pharmaceutical Co., Ltd. develops, manufactures and markets a variety of medical products.  The Company's products include anti-influenza,  antihypertensives, and antibiotics.

China Resources Dubl Crne Phrmctl (600062 CH)

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China Resources Dubl Crne Phrmctl (600062 CH)

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

SSY Group is facing short term issues related to the pandemic. As the world normalizes it should win share and grow at a low double-digit pace for...

Reperio Capital

Consun Pharma 2016 FY: What's in the New Concoction?

Consun Pharma has managed to book a double-digit growth in revenue and earnings, 47.2% and 23.2% respectively; thanks to the sales growth of 13.8%...

Henry Soediarko

CR Pharma: New Details, Final Thoughts

This Insight follows up on our three prior Insights on the company. Here we discuss our opinion of the offering; additional details from the PHIP;...

Kemp Dolliver, CFA

CR Pharma Listing: Part 3

China Resources Pharmaceutical Group has filed an Application Proof to list on the HKEX this year, possibly in the current quarter. Our previous...

Kemp Dolliver, CFA

CR Pharma Listing: Part 2

China Resources Pharmaceutical Group has filed an Application Proof to list on the HKEX this year, possibly in the current quarter. Our initial...

Kemp Dolliver, CFA

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