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

China Shineway Pharmaceutical / Equity Bottom-Up

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?

Transport Sector, China and Asia-focused Research

Charles De Trenck

Thematic (Sector/Industry)

This is an invest-able idea at the private level  with long term benefits. Both for the body, and for other ideas as well.Ever since I turned over a new leaf vis a vis health five plus years ago, I have explored active alternative health solutions. I have a long list of things I have solved and people I have seen gain real improvements from alternative treatments.  I have seen real growth in options to treatment of severe conditions.Most interesting perhaps has been learning about the benefits…

This is an invest-able idea at the private level  with long term benefits. Both for the body, and for other ideas as well.Ever since I turned over a new leaf vis a vis health five plus years ago, I have explored active alternative health solutions. I have a long list of things I have solved and people I have seen gain real improvements from alternative treatments.  I have seen real growth in options to treatment of severe conditions.Most interesting perhaps has been learning about the benefits…

Energy Medicine. Personal Experience. Impact. Growth in Asia. Ideas

Founder

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…

Hong Kong

SSY Group Limited researches, develops, manufactures, and sells a wide range of pharmaceutical products.  The Company sells non PVC soft bags, PP plastic bottles, and glass bottle infusions.

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SSY Group Ltd (2005 HK)

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

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

Energy Medicine. Personal Experience. Impact. Growth in Asia. Ideas

This is an invest-able idea at the private level with long term benefits. Both for the body, and for other ideas as well.Ever since I turned over...

Charles De Trenck

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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