We build on Nitin Mangal ‘s Apollo Hospital Enterprise Limited: From Sunshine To ShadesApollo Hospitals Enterprise (APHS IN). Our focus for this Insight is the standalone pharmacy business that Apollo has recently reorganised. We discuss our key takeaways from our meeting with a wholesale pharmaceutical distributor based out of Mumbai and visits to Jan Aushadi Kendras, Local pharma stores and Apollo Pharmacy stores. We believe over the next 5 years, the offline pharmacy retail business is going to change in India. In view of the competitive intensity in the Industry and deep discounting by online retailers, management’s projected growth numbers look highly optimistic. Apollo should also re-evaluate its strategy of purchasing medicines from related parties, and try sourcing directly or at more competitive terms which could possibly lead to some more improvement in operating margins.
We initiate coverage on BCH with a BUY rating, based on a target price of Bt21, which is derived from a DCF methodology (WACC 6.8% and terminal growth 0%), implying 43.8xPE’19E, a a 19% premium to the Thai Health Care sector.
The story:
Hospital with the most number of Social Security registered against an ageing society theme.
Market overreacted to earnings disappointment in 4Q18.
New strategies attract foreign patients, boosting flagship hospital
IVF Lab to create new growth opportunities
Adding three hospitals in areas of large potential demand.
Risks:
Lack of medical personnel & changes in social security policy
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
Aequitas Research puts out a weekly update on the deals that have been covered by Smartkarma Insight Providers recently, along with updates for upcoming IPOs.
This will be the third week in a row we are saying: there are more IPOs coming in Hong Kong!Momentum seems to be holding up as we head into the end of Q2. First off, there will be 4 IPOs starting to trade throughout next week. Mulsanne Group Holding Ltd (1817 HK) will debut first on Monday.
This would be interesting to watch because the IPO utilized the new pricing mechanism in Hong Kong to price its IPO below the bottom end of its indicated price range rather than withdraw and refile. This mechanism reminds us of the pricing flexibility of US IPOs wherein companies could price below its indicative price range to ensure that it performs well on its debut despite poor demand during bookbuild. Xinyi Energy Holdings Ltd (3868 HK), Frontage Holdings (1521 HK), and MabPharm (2181 HK) will trade on Tuesday, Thursday, and Friday respectively.
IPO activity in other countries have been fairly muted. Eagle Hospitality Trust (EAGLEHT SP) finally started trading in Singapore. Its share price closed 6% down as the IPO was undersubscribed. We will leave the updates on the IPO to Sumeet Singh on Monday.
In the U.S, GSX Techedu (GSX US) will launch its book next week while Meten (MEDU US) which just filed its US$100m IPO with the SEC will be premarketing next week.
Our overall accuracy rate is 72.4% for IPOs and 63.9% for Placements
(Performance measurement criteria is explained at the end of the note)
New IPO filings
Sinic Holdings (Hong Kong, >US$100m)
Meten International Edu (the U.S, US$100m)
Below is a snippet of our IPO tool showing upcoming events for the next week. The IPO tool is designed to provide readers with timely information on all IPO related events (Book open/closing, listing, initiation, lock-up expiry, etc) for all the deals that we have worked on. You can access the tool here or through the tools menu.
Although Mallinckrodt’s bonds are trading at a significant discount to par, we recommend investors remain side-lined given our assessment of the probability of further price volatility.
Although we acknowledge the equity cushion given a conservative EV/EBITDA valuation of ~6x vs. total debt/EBITDA of ~ 5x, we expect continued price volatility.
Accordingly, we believe a more attractive entry point will present itself over the coming months at a lower price level. Despite this, we think that the business, or its individual segments, will remain a going concern with an eventual spin-off into separate entities as per management’s plan.
However, the issue is timing and we expect further volatility due to legal/regulatory risk which is difficult to quantify
Hansoh Pharma has started pre-marketing its IPO to raise USD 1bn in its IPO. In our previous insights, we covered the company’s major products and core drug candidates, its shareholders, the latest financials and the 4+7 centralized procurement, as well as a detailed discussion on its key product, the third generation EGFR TKI HS-10296.
In this insight, I’ll provide a more detailed analysis of its valuation.
In FY Mar-19 as a whole, sales and operating profit were both up 3.9%, but sales stopped growing and operating profit was down 2.7% year-on-year in 4Q, which is seasonally the company’s strongest quarter. In 1H, operating profit was up 10.7% year-on-year.
The breakdown of 4Q operating profit shows 30% – 40% year-on-year declines in Medical Systems and Aircraft Equipment and increases of 1% or less in Analytical & Measuring Instruments and Industrial Machinery (the company’s two most profitable divisions). Operating profits on Analytical & Measuring Instruments and Industrial Machinery were up 8.6% and 18.6%, respectively, in 1H.
For FY Mar-20, management is guiding for a 4.8% increase in sales and a 5.7% increase in operating profit. Our estimates are more conservative and given demand trends in the company’s user industries, we see no reason to change them now.
At ¥2,751 (May 22 closing price), the shares are selling at 25x our EPS estimate for FY Mar-20 and 24x our estimate for FY Mar-21. The five-year historical P/E range is 13x – 33x. The shares are not notably expensive, but a positive catalyst is lacking.
Hansoh Pharma has started pre-marketing its IPO to raise USD 1bn in its IPO. In our previous insights, we covered the company’s major products and core drug candidates, and its shareholders, the latest financials and the 4+7 centralized procurement. In this insight, we will provide more details on its key drug candidate, HS-10296, which is a third generation EGFR TKI. As the company provides little details on the HS-10296 besides briefly mentioning that the company has submitted NDA for the treatment of NSCLC. We believe that understanding HS-10296 is pivotal to the valuation of the company.
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
We build on Nitin Mangal ‘s Apollo Hospital Enterprise Limited: From Sunshine To ShadesApollo Hospitals Enterprise (APHS IN). Our focus for this Insight is the standalone pharmacy business that Apollo has recently reorganised. We discuss our key takeaways from our meeting with a wholesale pharmaceutical distributor based out of Mumbai and visits to Jan Aushadi Kendras, Local pharma stores and Apollo Pharmacy stores. We believe over the next 5 years, the offline pharmacy retail business is going to change in India. In view of the competitive intensity in the Industry and deep discounting by online retailers, management’s projected growth numbers look highly optimistic. Apollo should also re-evaluate its strategy of purchasing medicines from related parties, and try sourcing directly or at more competitive terms which could possibly lead to some more improvement in operating margins.
We initiate coverage on BCH with a BUY rating, based on a target price of Bt21, which is derived from a DCF methodology (WACC 6.8% and terminal growth 0%), implying 43.8xPE’19E, a a 19% premium to the Thai Health Care sector.
The story:
Hospital with the most number of Social Security registered against an ageing society theme.
Market overreacted to earnings disappointment in 4Q18.
New strategies attract foreign patients, boosting flagship hospital
IVF Lab to create new growth opportunities
Adding three hospitals in areas of large potential demand.
Risks:
Lack of medical personnel & changes in social security policy
Viva Biotech Holdings (1873 HK) is a leading global contract research organisation (CRO). It has launched its IPO to raise net proceeds of HK$1,232 million ($157 million), at the mid-point of the IPO price range.
Overall, with the caveat that Viva’s valuation is highly dependent on fair value gains (from its portfolio companies), we believe that Viva can just about justify the low-end of IPO price range
Hutchison-China Meditech, China-based AIM and NASDAQ dual listed pharmaceutical company, is seeking to raise up to USD 500 million via a Hong Kong listing. In this insight, we will discuss the following topics:
Company background
Progress of clinical trials of its three key drug candidates
Key licensing agreements
Key takeaways from its financials
Shareholders of the company
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
We initiate coverage on BCH with a BUY rating, based on a target price of Bt21, which is derived from a DCF methodology (WACC 6.8% and terminal growth 0%), implying 43.8xPE’19E, a a 19% premium to the Thai Health Care sector.
The story:
Hospital with the most number of Social Security registered against an ageing society theme.
Market overreacted to earnings disappointment in 4Q18.
New strategies attract foreign patients, boosting flagship hospital
IVF Lab to create new growth opportunities
Adding three hospitals in areas of large potential demand.
Risks:
Lack of medical personnel & changes in social security policy
Viva Biotech Holdings (1873 HK) is a leading global contract research organisation (CRO). It has launched its IPO to raise net proceeds of HK$1,232 million ($157 million), at the mid-point of the IPO price range.
Overall, with the caveat that Viva’s valuation is highly dependent on fair value gains (from its portfolio companies), we believe that Viva can just about justify the low-end of IPO price range
Hutchison-China Meditech, China-based AIM and NASDAQ dual listed pharmaceutical company, is seeking to raise up to USD 500 million via a Hong Kong listing. In this insight, we will discuss the following topics:
Company background
Progress of clinical trials of its three key drug candidates
Key licensing agreements
Key takeaways from its financials
Shareholders of the company
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
We initiate coverage on BCH with a BUY rating, based on a target price of Bt21, which is derived from a DCF methodology (WACC 6.8% and terminal growth 0%), implying 43.8xPE’19E, a a 19% premium to the Thai Health Care sector.
The story:
Hospital with the most number of Social Security registered against an ageing society theme.
Market overreacted to earnings disappointment in 4Q18.
New strategies attract foreign patients, boosting flagship hospital
IVF Lab to create new growth opportunities
Adding three hospitals in areas of large potential demand.
Risks:
Lack of medical personnel & changes in social security policy
Viva Biotech Holdings (1873 HK) is a leading global contract research organisation (CRO). It has launched its IPO to raise net proceeds of HK$1,232 million ($157 million), at the mid-point of the IPO price range.
Overall, with the caveat that Viva’s valuation is highly dependent on fair value gains (from its portfolio companies), we believe that Viva can just about justify the low-end of IPO price range
Hutchison-China Meditech, China-based AIM and NASDAQ dual listed pharmaceutical company, is seeking to raise up to USD 500 million via a Hong Kong listing. In this insight, we will discuss the following topics:
Company background
Progress of clinical trials of its three key drug candidates
In this insight, we will value the company business segments by parts, look at the deal dynamics, and run the deal through our IPO framework.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
Although Mallinckrodt’s bonds are trading at a significant discount to par, we recommend investors remain side-lined given our assessment of the probability of further price volatility.
Although we acknowledge the equity cushion given a conservative EV/EBITDA valuation of ~6x vs. total debt/EBITDA of ~ 5x, we expect continued price volatility.
Accordingly, we believe a more attractive entry point will present itself over the coming months at a lower price level. Despite this, we think that the business, or its individual segments, will remain a going concern with an eventual spin-off into separate entities as per management’s plan.
However, the issue is timing and we expect further volatility due to legal/regulatory risk which is difficult to quantify
Hansoh Pharma has started pre-marketing its IPO to raise USD 1bn in its IPO. In our previous insights, we covered the company’s major products and core drug candidates, its shareholders, the latest financials and the 4+7 centralized procurement, as well as a detailed discussion on its key product, the third generation EGFR TKI HS-10296.
In this insight, I’ll provide a more detailed analysis of its valuation.
In FY Mar-19 as a whole, sales and operating profit were both up 3.9%, but sales stopped growing and operating profit was down 2.7% year-on-year in 4Q, which is seasonally the company’s strongest quarter. In 1H, operating profit was up 10.7% year-on-year.
The breakdown of 4Q operating profit shows 30% – 40% year-on-year declines in Medical Systems and Aircraft Equipment and increases of 1% or less in Analytical & Measuring Instruments and Industrial Machinery (the company’s two most profitable divisions). Operating profits on Analytical & Measuring Instruments and Industrial Machinery were up 8.6% and 18.6%, respectively, in 1H.
For FY Mar-20, management is guiding for a 4.8% increase in sales and a 5.7% increase in operating profit. Our estimates are more conservative and given demand trends in the company’s user industries, we see no reason to change them now.
At ¥2,751 (May 22 closing price), the shares are selling at 25x our EPS estimate for FY Mar-20 and 24x our estimate for FY Mar-21. The five-year historical P/E range is 13x – 33x. The shares are not notably expensive, but a positive catalyst is lacking.
Hansoh Pharma has started pre-marketing its IPO to raise USD 1bn in its IPO. In our previous insights, we covered the company’s major products and core drug candidates, and its shareholders, the latest financials and the 4+7 centralized procurement. In this insight, we will provide more details on its key drug candidate, HS-10296, which is a third generation EGFR TKI. As the company provides little details on the HS-10296 besides briefly mentioning that the company has submitted NDA for the treatment of NSCLC. We believe that understanding HS-10296 is pivotal to the valuation of the company.
This block deal was another nice exit point for Celltrion H short sellers to wrap up short position. Just, 6.5M offering was simply massive, and even more than what these short sellers could absorb. This was partly why it was priced at floor. Would we see another opportunity like this? 90 days lock up is on One Equity’s remaining 10% stake. But it is very possible that Ion will make a similar move. Apparently, many investors are disappointed and concerned about Seo Jung-ju’s bluffing tactic. So, if we can get the timing right, we will easily enjoy a 8~10% gain by shorting and taking deals to close the position.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
Viva Biotech Holdings (1873 HK) is a leading global contract research organisation (CRO). It has launched its IPO to raise net proceeds of HK$1,232 million ($157 million), at the mid-point of the IPO price range.
Overall, with the caveat that Viva’s valuation is highly dependent on fair value gains (from its portfolio companies), we believe that Viva can just about justify the low-end of IPO price range
Hutchison-China Meditech, China-based AIM and NASDAQ dual listed pharmaceutical company, is seeking to raise up to USD 500 million via a Hong Kong listing. In this insight, we will discuss the following topics:
Company background
Progress of clinical trials of its three key drug candidates
In this insight, we will value the company business segments by parts, look at the deal dynamics, and run the deal through our IPO framework.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
Viva Biotech Holdings (1873 HK) is a leading global contract research organisation (CRO). It has launched its IPO to raise net proceeds of HK$1,232 million ($157 million), at the mid-point of the IPO price range.
Overall, with the caveat that Viva’s valuation is highly dependent on fair value gains (from its portfolio companies), we believe that Viva can just about justify the low-end of IPO price range
Hutchison-China Meditech, China-based AIM and NASDAQ dual listed pharmaceutical company, is seeking to raise up to USD 500 million via a Hong Kong listing. In this insight, we will discuss the following topics:
Company background
Progress of clinical trials of its three key drug candidates
Viva Biotech launched book building today to raise up to USD 194 million via its Hong Kong IPO. In our previous insights, we have discussed the company’s fundamentals. In this insight, we will provide our final thoughts on the deal with scores on our ECM Framework.
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
Hansoh Pharma has started pre-marketing its IPO to raise USD 1bn in its IPO. In our previous insights, we covered the company’s major products and core drug candidates, its shareholders, the latest financials and the 4+7 centralized procurement, as well as a detailed discussion on its key product, the third generation EGFR TKI HS-10296.
In this insight, I’ll provide a more detailed analysis of its valuation.
In FY Mar-19 as a whole, sales and operating profit were both up 3.9%, but sales stopped growing and operating profit was down 2.7% year-on-year in 4Q, which is seasonally the company’s strongest quarter. In 1H, operating profit was up 10.7% year-on-year.
The breakdown of 4Q operating profit shows 30% – 40% year-on-year declines in Medical Systems and Aircraft Equipment and increases of 1% or less in Analytical & Measuring Instruments and Industrial Machinery (the company’s two most profitable divisions). Operating profits on Analytical & Measuring Instruments and Industrial Machinery were up 8.6% and 18.6%, respectively, in 1H.
For FY Mar-20, management is guiding for a 4.8% increase in sales and a 5.7% increase in operating profit. Our estimates are more conservative and given demand trends in the company’s user industries, we see no reason to change them now.
At ¥2,751 (May 22 closing price), the shares are selling at 25x our EPS estimate for FY Mar-20 and 24x our estimate for FY Mar-21. The five-year historical P/E range is 13x – 33x. The shares are not notably expensive, but a positive catalyst is lacking.
Hansoh Pharma has started pre-marketing its IPO to raise USD 1bn in its IPO. In our previous insights, we covered the company’s major products and core drug candidates, and its shareholders, the latest financials and the 4+7 centralized procurement. In this insight, we will provide more details on its key drug candidate, HS-10296, which is a third generation EGFR TKI. As the company provides little details on the HS-10296 besides briefly mentioning that the company has submitted NDA for the treatment of NSCLC. We believe that understanding HS-10296 is pivotal to the valuation of the company.
This block deal was another nice exit point for Celltrion H short sellers to wrap up short position. Just, 6.5M offering was simply massive, and even more than what these short sellers could absorb. This was partly why it was priced at floor. Would we see another opportunity like this? 90 days lock up is on One Equity’s remaining 10% stake. But it is very possible that Ion will make a similar move. Apparently, many investors are disappointed and concerned about Seo Jung-ju’s bluffing tactic. So, if we can get the timing right, we will easily enjoy a 8~10% gain by shorting and taking deals to close the position.
On Thursday (16th May), Fujifilm (4901 JP) announced that it has entered into an agreement to acquire medwork GmbH, headquartered in Bayern, Germany. medwork develops, manufactures and markets instruments for therapeutic and diagnostic endoscopy and following the acquisition, medwork will become a 100%-owned subsidiary of Fujifilm. The company has not provided more details regarding the deal. However, according to sources, Fujifilm will be paying close to JPY8-9bn for medwork. We expect the medwork acquisition to complement Fujifilm’s existing endoscopes business.
This comes as a part of Fujifilm’s focus on rapidly expanding its footprint in the growing healthcare sector. In March 2019, the company also announced the acquisition of Biogen Manufacturing, a manufacturing subsidiary of Biogen (Denmark) which is expected to strengthen Fujifilm’s Bio CDMO business.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
In FY Mar-19 as a whole, sales and operating profit were both up 3.9%, but sales stopped growing and operating profit was down 2.7% year-on-year in 4Q, which is seasonally the company’s strongest quarter. In 1H, operating profit was up 10.7% year-on-year.
The breakdown of 4Q operating profit shows 30% – 40% year-on-year declines in Medical Systems and Aircraft Equipment and increases of 1% or less in Analytical & Measuring Instruments and Industrial Machinery (the company’s two most profitable divisions). Operating profits on Analytical & Measuring Instruments and Industrial Machinery were up 8.6% and 18.6%, respectively, in 1H.
For FY Mar-20, management is guiding for a 4.8% increase in sales and a 5.7% increase in operating profit. Our estimates are more conservative and given demand trends in the company’s user industries, we see no reason to change them now.
At ¥2,751 (May 22 closing price), the shares are selling at 25x our EPS estimate for FY Mar-20 and 24x our estimate for FY Mar-21. The five-year historical P/E range is 13x – 33x. The shares are not notably expensive, but a positive catalyst is lacking.
Hansoh Pharma has started pre-marketing its IPO to raise USD 1bn in its IPO. In our previous insights, we covered the company’s major products and core drug candidates, and its shareholders, the latest financials and the 4+7 centralized procurement. In this insight, we will provide more details on its key drug candidate, HS-10296, which is a third generation EGFR TKI. As the company provides little details on the HS-10296 besides briefly mentioning that the company has submitted NDA for the treatment of NSCLC. We believe that understanding HS-10296 is pivotal to the valuation of the company.
This block deal was another nice exit point for Celltrion H short sellers to wrap up short position. Just, 6.5M offering was simply massive, and even more than what these short sellers could absorb. This was partly why it was priced at floor. Would we see another opportunity like this? 90 days lock up is on One Equity’s remaining 10% stake. But it is very possible that Ion will make a similar move. Apparently, many investors are disappointed and concerned about Seo Jung-ju’s bluffing tactic. So, if we can get the timing right, we will easily enjoy a 8~10% gain by shorting and taking deals to close the position.
On Thursday (16th May), Fujifilm (4901 JP) announced that it has entered into an agreement to acquire medwork GmbH, headquartered in Bayern, Germany. medwork develops, manufactures and markets instruments for therapeutic and diagnostic endoscopy and following the acquisition, medwork will become a 100%-owned subsidiary of Fujifilm. The company has not provided more details regarding the deal. However, according to sources, Fujifilm will be paying close to JPY8-9bn for medwork. We expect the medwork acquisition to complement Fujifilm’s existing endoscopes business.
This comes as a part of Fujifilm’s focus on rapidly expanding its footprint in the growing healthcare sector. In March 2019, the company also announced the acquisition of Biogen Manufacturing, a manufacturing subsidiary of Biogen (Denmark) which is expected to strengthen Fujifilm’s Bio CDMO business.
It was announced after market close today that One Equity Partners plans to sell 6.5 million shares (4.5% of shares outstanding) of Celltrion Healthcare (091990 KS). The expected price is at a 5.1% to 8.0% discount to the closing price of 65,300 won. We would avoid this deal because the 5.1% to 8.0% discount range does not seem to be enough.
Since the previous block deal in September 2018, Celltrion Healthcare shares have fallen nearly 29% and the fact that One Equity Partners is continuing to unload their shares means further risk since the market will be further concerned with additional selling of Celltrion Healthcare shares by One Equity Partners at even lower prices.
In the past three years, the previous shares support for Celltrion Healthcare was in the 50,000 won to 55,000 won level, which means there could be additional downside risk of nearly 15-23% over the next several weeks.
Get Straight to the Source on Smartkarma
Smartkarma supports the world’s leading investors with high-quality, timely, and actionable Insights. Subscribe now for unlimited access, or request a demo below.
