IPOs and Catalysts/Events, Global Equity Research Ltd

Arun George

IPOs and Catalysts/Events

Uncompromised, Independent, Conflict-Free Research

Global Equity Research Ltd

Global Equity Research was started in 2017 by a group of experienced research professionals. It was founded on a passionate belief in the importance and the need for uncompromised, independent, conflict-free research. We aim to provide differentiated and actionable primary and bottom up fundamental research.

Event-Driven

China Traditional Chinese Medicine / Event-Driven

China Traditional Chinese Medicine (570 HK)

<ul>
<li>On no news, <a href="https://www.smartkarma.com/entities/china-traditional-chinese-medicine" target="_blank" data-smartkarma-citation="entities:351:1" rel="noopener">China Traditional Chinese Medicine (570 HK)</a> shares declined 12% today. We spoke to several readers to gauge the likely reasons for the fall.</li>
<li>The speculation is that the fall could be due to forced liquidation, Sinopharm’s new Chairman pulling the offer, the consortium unravelling, SAMR issues and Ping An blocking the deal. </li>
<li>There is clearly news behind today’s fall, but none of the above rumours seem credible. The risk/reward is attractive as the upside (25% spread) outweighs the downside (18% to undisturbed).</li>
</ul>


On no news, China Traditional Chinese Medicine (570 HK) shares declined 12% today. We spoke to several readers to gauge the likely reasons for the fall.
The speculation is that the fall could be due to forced liquidation, Sinopharm’s new Chairman pulling the offer, the consortium unravelling, SAMR issues and Ping An blocking the deal. 
There is clearly news behind today’s fall, but none of the above rumours seem credible. The risk/reward is attractive as the upside (25% spread) outweighs the downside (18% to undisturbed).


China Traditional Chinese Medicine (570 HK): Something Is Brewing, but Nobody Knows Quite What

HK/China Healthcare Analyst (ex-Fosun Pharma)

Xinyao (Criss) Wang

<ul>
<li>Some investors have concerns that the privatization may fail. We also noticed that Morgan Stanley raised China TCM's target price to HK$5.4. However, the privatization of China TCM seems “mandatory”.</li>
<li>At this stage, some background information is worth the attention, which will help investors better understand the logic behind this privatization and thus resolve the "confusion".</li>
<li>According to regulatory requirements, it's expected that both CNPGC and Taiji will integrate resources in pharmaceutical manufacturing and distribution sectors, so as to solve horizontal competition issue between the two.</li>
</ul>


Some investors have concerns that the privatization may fail. We also noticed that Morgan Stanley raised China TCM's target price to HK$5.4. However, the privatization of China TCM seems “mandatory”.
At this stage, some background information is worth the attention, which will help investors better understand the logic behind this privatization and thus resolve the "confusion".
According to regulatory requirements, it's expected that both CNPGC and Taiji will integrate resources in pharmaceutical manufacturing and distribution sectors, so as to solve horizontal competition issue between the two.


China TCM (570.HK) Update - Despite Doubts, This Privatization Seems “Mandatory”

Equity Bottom-Up

Shanghai Shyndec Pharmaceutical / Equity Bottom-Up

Shanghai Shyndec Pharmaceutical (600420 CH)

<ul>
<li>China plans to issue ultra long-term special treasury bond (about RMB1 trillion) to promote large-scale medical equipment renewal, which is expected to boost domestic demand in medical device sector. </li>
<li>Various regions (e.g. Beijing, Hainan, Guangzhou, Zhuhai) have issued separate supporting policies for innovative drug industry. It may be too early to completely lose hope of Chinese innovative drugs.</li>
<li>There is “horizontal competition” issue between Taiji and <a href="https://www.smartkarma.com/entities/shanghai-shyndec-pharmaceutical-co-ltd" target="_blank" data-smartkarma-citation="entities:1952:1" rel="noopener">Shanghai Shyndec Pharmaceutical (600420 CH)</a>, which is the underlying logic for potential spin-offs and integrations within Taiji and China TCM before 2025.</li>
</ul>


China plans to issue ultra long-term special treasury bond (about RMB1 trillion) to promote large-scale medical equipment renewal, which is expected to boost domestic demand in medical device sector. 
Various regions (e.g. Beijing, Hainan, Guangzhou, Zhuhai) have issued separate supporting policies for innovative drug industry. It may be too early to completely lose hope of Chinese innovative drugs.
There is “horizontal competition” issue between Taiji and Shanghai Shyndec Pharmaceutical (600420 CH), which is the underlying logic for potential spin-offs and integrations within Taiji and China TCM before 2025.


China Healthcare Weekly (Apr14)- Shanghai Shyndec Pharma,Innovative Drug Policy,Ultra Long-Term Bond

<ul>
<li>Since “no dividend was proposed for the year ended 31 December 2023”, the privatization is highly likely to succeed. It may not be wise for investors to bet against privatization.</li>
<li>The recent high-level personnel changes in Taiji is “thought-provoking”, which seems to be preparing for the next step of integrating with China TCM. Spin-offs and integrations are expected within Taiji.</li>
<li>We analyzed possible playbook. In this way, CNPGC is able to solve the problem of horizontal competition. China TCM could also relist in A-share to gain higher valuations/better liquidity.</li>
</ul>


Since “no dividend was proposed for the year ended 31 December 2023”, the privatization is highly likely to succeed. It may not be wise for investors to bet against privatization.
The recent high-level personnel changes in Taiji is “thought-provoking”, which seems to be preparing for the next step of integrating with China TCM. Spin-offs and integrations are expected within Taiji.
We analyzed possible playbook. In this way, CNPGC is able to solve the problem of horizontal competition. China TCM could also relist in A-share to gain higher valuations/better liquidity.


China TCM (570.HK) - Latest Updates on Privatization and the Potential Merger with Taiji Group

Chongqing Taiji Industry (Group) A / Event-Driven

Chongqing Taiji Industry (Group) A (600129 CH)

<ul>
<li>In the past few years, a big problem of Taiji is weak performance/low valuation. The main purpose of mixed-ownership reform with CNPGC is to improve operational efficiency and enhance profitability.</li>
<li>CNPGC made a clear commitment to solve the horizontal competition issue. So, after the privatization of China TCM is completed, it's worth noting whether it will be merged into Taiji.</li>
<li>2024 is expected to see Taiji launch new M&amp;A deals, which would bring a qualitative leap for Taiji. Market value of Taiji is expected to at least double. </li>
</ul>


In the past few years, a big problem of Taiji is weak performance/low valuation. The main purpose of mixed-ownership reform with CNPGC is to improve operational efficiency and enhance profitability.
CNPGC made a clear commitment to solve the horizontal competition issue. So, after the privatization of China TCM is completed, it's worth noting whether it will be merged into Taiji.
2024 is expected to see Taiji launch new M&amp;A deals, which would bring a qualitative leap for Taiji. Market value of Taiji is expected to at least double. 


Will China TCM (570.HK) Be Incorporated into Taiji Group (600129.CH)? –If Yes, Valuation Will Double

China

Chongqing Taiji Industry (Group) Co., Ltd. manufactures and markets medicines, healthcare products, medical packing products, and medical instruments.  The Company also imports and exports Chinese medicine materials and medical packing materials.

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Chongqing Taiji Industry (Group) A (600129 CH)

China Traditional Chinese Medicine (570 HK): Something Is Brewing, but Nobody Knows Quite What

We spoke to several readers to gauge the likely reasons for the share price fall. There is clearly news behind today’s fall, but none of the...

Arun George

China TCM (570.HK) Update - Despite Doubts, This Privatization Seems “Mandatory”

Some investors have concerns that the privatization may fail, but China TCM's privatization seems "mandatory", which will lead to spin-off...

Xinyao (Criss) Wang

China Healthcare Weekly (Apr14)- Shanghai Shyndec Pharma,Innovative Drug Policy,Ultra Long-Term Bond

China will issue special treasury bonds for healthcare.New policy boosts hope for innovative drugs.Horizontal competition in Taiji and Shanghai...

Xinyao (Criss) Wang

China TCM (570.HK) - Latest Updates on Privatization and the Potential Merger with Taiji Group

The privatization is highly likely to succeed. It's not wise for investors to bet against privatization.Taiji's high-level personnel changes...

Xinyao (Criss) Wang

Will China TCM (570.HK) Be Incorporated into Taiji Group (600129.CH)? –If Yes, Valuation Will Double

Under the leadership of CNPGC, Taiji has entered the right track, with significant performance growth.If China TCM is ultimately merged into Taiji...

Xinyao (Criss) Wang

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

China Traditional Chinese Medicine (570 HK): Something Is Brewing, but Nobody Knows Quite What

We spoke to several readers to gauge the likely reasons for the share price fall. There is clearly news behind today’s fall, but none of the...

Arun George

China TCM (570.HK) Update - Despite Doubts, This Privatization Seems “Mandatory”

Some investors have concerns that the privatization may fail, but ​China TCM's privatization seems "mandatory", which will lead to spin-off...

Xinyao (Criss) Wang

China Healthcare Weekly (Apr14)- Shanghai Shyndec Pharma,Innovative Drug Policy,Ultra Long-Term Bond

​China will issue special treasury bonds for healthcare.New policy boosts hope for innovative drugs.Horizontal competition in Taiji and Shanghai...

Xinyao (Criss) Wang

China TCM (570.HK) - Latest Updates on Privatization and the Potential Merger with Taiji Group

The privatization is highly likely to succeed. It's not wise for investors to bet against privatization.Taiji's high-level personnel changes...

Xinyao (Criss) Wang

Will China TCM (570.HK) Be Incorporated into Taiji Group (600129.CH)? –If Yes, Valuation Will Double

Under the leadership of CNPGC, Taiji has entered the right track, with significant performance growth.If China TCM is ultimately merged into Taiji...

Xinyao (Criss) Wang

Some investors have concerns that the privatization may fail, but China TCM's privatization seems "mandatory", which will lead to spin-off...

China will issue special treasury bonds for healthcare.New policy boosts hope for innovative drugs.Horizontal competition in Taiji and Shanghai...