Asian Insight Provider - Actionable ideas, CrossASEAN Research

Henry Soediarko

Asian Insight Provider - Actionable ideas

CrossASEAN Research

At CrossASEAN Research we strive to produce unbiased and differentiated on the ground insights on companies across South East Asia. Our Research is produced for the most part after face to face meetings and conversations with company management to dig deep into the long term vision and strategy of the companies we cover. We seek to deliver investable and actionable themes on sectors and markets across SE Asia, often in collaboration with other Insight Providers across the region, pooling the vast experience of the analysts within the Smartkarma Ecosystem. We also offer bespoke work and tailor made trips for our clients. 

Insights across South East Asia

Equity Bottom-Up

China Shineway Pharmaceutical / Equity Bottom-Up

A year ago, I wrote about <a href="https://www.smartkarma.com/entities/6241" target="_blank" data-smartkarma-citation="entities:6241:1">China Shineway Pharmaceutical Group Ltd. (2877 HK)</a> that has a couple of low-cost drugs that sell in the second and third tier cities in China, limited only in Hebei Province for now but this is about to change. According to the management, the market for TCM granules is expected to be deregulated in the 3Q 2018 that sees the provincial player (currently is only allowed to sell within their home province) has the license to sell outside their home province. With strong sales staff and production capability, China Shineway is positioned to take advantage of the TCM granules deregulation. Burdened with stagnant sales growth over the past 5 years, the company can potentially turn into a growth story. In this report, we will discuss the following:<ol>
<li>Recent share price development</li>
<li>Q1 2018 update</li>
<li>Grassroots medical institution development in China</li>
<li>Update on China Shineway Pharmaceutical</li>
<li>Nationwide movement on TCM granules and Injection</li>
<li>Valuation</li>
</ol>

A year ago, I wrote about China Shineway Pharmaceutical Group Ltd. (2877 HK) that has a couple of low-cost drugs that sell in the second and third tier cities in China, limited only in Hebei Province for now but this is about to change. According to the management, the market for TCM granules is expected to be deregulated in the 3Q 2018 that sees the provincial player (currently is only allowed to sell within their home province) has the license to sell outside their home province. With strong sales staff and production capability, China Shineway is positioned to take advantage of the TCM granules deregulation. Burdened with stagnant sales growth over the past 5 years, the company can potentially turn into a growth story. In this report, we will discuss the following:
Recent share price development
Q1 2018 update
Grassroots medical institution development in China
Update on China Shineway Pharmaceutical
Nationwide movement on TCM granules and Injection
Valuation


China Shineway(2877: HK): Beneficiary from Deregulation of Non-Essential Drug in Grassroots Level

Shijiazhuang City production halt to reduce air pollution presents an opportunity to <a href="https://www.smartkarma.com/entities/6241" target="_blank" data-smartkarma-citation="entities:6241:1">China Shineway Pharmaceutical Group Ltd. (2877 HK)</a> as they have the most inventory ready for sale compared to their competitors. Their cash balance (50% of total assets) is also a cushion that the dividend payment will not be reduced/omitted and a war-chest to proceed with inorganic growth into biopharmaceutical companies that will increase their overall net margin.  The company is currently trading at ex-cash 4.91x PE with 3% dividend yield.

Shijiazhuang City production halt to reduce air pollution presents an opportunity to China Shineway Pharmaceutical Group Ltd. (2877 HK) as they have the most inventory ready for sale compared to their competitors. Their cash balance (50% of total assets) is also a cushion that the dividend payment will not be reduced/omitted and a war-chest to proceed with inorganic growth into biopharmaceutical companies that will increase their overall net margin.  The company is currently trading at ex-cash 4.91x PE with 3% dividend yield.   

The Only Company that May Benefit from Shijiazhuang Incident?

Founder, Riedel Research

David Riedel

Founder

Independent equity research on GEM Markets

Riedel Research

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We recently screened the HKG and China markets for ideas with below market P/E ratios and Dividend Yields above 2% that traded more than US$1 mn per day.  This screen netted 207 names.We then screened for which companies have corporate governance scores over 70/100 from the Riedel Research Corporate Governance Scoring system.The RRG Corporate Governance system scores Emerging Market companies on 12 different criteria to measure board independence, alignment of interest with shareholders…

We recently screened the HKG and China markets for ideas with below market P/E ratios and Dividend Yields above 2% that traded more than US$1 mn per day.  This screen netted 207 names.We then screened for which companies have corporate governance scores over 70/100 from the Riedel Research Corporate Governance Scoring system.The RRG Corporate Governance system scores Emerging Market companies on 12 different criteria to measure board independence, alignment of interest with shareholders…

Actionable Value Ideas with Solid Corporate Governance in China and Hong Kong

Kemp Dolliver, CFA

Cherrystone Hill Research

North China Pharmaceutical Co. Ltd. (600812 CH) announced that it resumed production on Sunday after a 51-day production halt.  Management estimates that the halt caused lost profit of RMB11 million (possibly as much as 20% of net income).We assume that other companies such as SSY Group (2005 HK), CSPC Pharmaceutical (1093 HK), and China Shineway (2877 HK) will resume production in the near future. SSY derives nearly all of its revenue from factories based in Shijiazhuang. In addition, SSY's 89…

North China Pharmaceutical Co. Ltd. (600812 CH) announced that it resumed production on Sunday after a 51-day production halt.  Management estimates that the halt caused lost profit of RMB11 million (possibly as much as 20% of net income).We assume that other companies such as SSY Group (2005 HK), CSPC Pharmaceutical (1093 HK), and China Shineway (2877 HK) will resume production in the near future. SSY derives nearly all of its revenue from factories based in Shijiazhuang. In addition, SSY's 89…

Air quality in Shijiazhuang City, Hebei Province continues to deteriorate as colder weather causes a sharp uptick in coal burning to heat buildings. As a result, the risk of longer production suspensions for pharmaceutical companies is increasing. The headline below from the SCMP is scary enough (PM2.5 and PM10 of 1,000+). The article mentions that conditions could improve in a few days, but this year's "smog season" (for lack of a better term) is proving to be worse than expected:<a href="http://www.scmp.com/news/china/society/article/2055810/air-pollution-hebei-climbs-past-1000-mark" target="_blank">Air Pollution</a>…

Air quality in Shijiazhuang City, Hebei Province continues to deteriorate as colder weather causes a sharp uptick in coal burning to heat buildings. As a result, the risk of longer production suspensions for pharmaceutical companies is increasing. The headline below from the SCMP is scary enough (PM2.5 and PM10 of 1,000+). The article mentions that conditions could improve in a few days, but this year's "smog season" (for lack of a better term) is proving to be worse than expected:Air Pollution…

China

China Shineway Pharmaceutical Group Limited is an investment holding company primarily engaged in the research, development, manufacturing, and trading of modern Chinese pharmaceutical products. Its diverse portfolio includes injections, soft capsules, and granules, targeting therapeutic areas such as cardiovascular, respiratory, and pediatric conditions. The company was founded in 2002 and is headquartered in Shijiazhuang, China.

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China Shineway Pharmaceutical (2877 HK)

China Shineway(2877: HK): Beneficiary from Deregulation of Non-Essential Drug in Grassroots Level

A year ago, I wrote about China Shineway Pharmaceutical Group Ltd. (2877 HK) that has a couple of low-cost drugs that sell in the second and third...

Henry Soediarko

The Only Company that May Benefit from Shijiazhuang Incident?

Shijiazhuang City production halt to reduce air pollution presents an opportunity to China Shineway Pharmaceutical Group Ltd. (2877 HK) as they...

Henry Soediarko

Actionable Value Ideas with Solid Corporate Governance in China and Hong Kong

We recently screened the HKG and China markets for ideas with below market P/E ratios and Dividend Yields above 2% that traded more than US$1 mn...

David Riedel

Manufacturing Gearing Up: Go Flat

North China Pharmaceutical Co. Ltd. (600812 CH) announced that it resumed production on Sunday after a 51-day production halt. Management...

Kemp Dolliver, CFA

Conspiracy of the Weather Gods

Air quality in Shijiazhuang City, Hebei Province continues to deteriorate as colder weather causes a sharp uptick in coal burning to heat...

Kemp Dolliver, CFA

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