In today’s briefing:
- TOPIX July Rebalance: Good Performance, Low Progression, Should Trade Right Way
- Otsuka Holdings (4578 JP): Revenue Guidance Raise and New Products Line-Up Enhance Conviction
- Micro-Tech Nanjing (688029.CH) – Potential for Reversals Despite Short-Term Pressure on Performance
- Concord Healthcare Group (CHG HK) Pre-IPO: Accumulated Loss and Cash Burn Cloud Growth Prospects
TOPIX July Rebalance: Good Performance, Low Progression, Should Trade Right Way
- The TOPIX Free-Float Rebalance for July will be executed tomorrow at the close.
- There should be about US$3.5bn to trade one-way with 150+ names down-weighted, 36 names up-weighted, and one inclusion – Mercari Inc (4385 JP).
- The trade has performed well so far, and excess volume appears limited in most cases. It appears uncrowded.
Otsuka Holdings (4578 JP): Revenue Guidance Raise and New Products Line-Up Enhance Conviction
- Otsuka Holdings (4578 JP) has raised revenue guidance for H1FY23 by 6%, due to continued strong performance of its four global brands, which contribute more than 35% of total revenue.
- However, the company has cut operating and net profit guidance for H1FY23, mainly due to one-off charge related to elimination of unrealized gains on inventories caused by yen depreciation.
- Otsuka received positive CHMP opinion for lupus nephritis drug, Lupkynis. This will pave the way for gaining marketing approval of the drug in Europe.
Micro-Tech Nanjing (688029.CH) – Potential for Reversals Despite Short-Term Pressure on Performance
- The main logic of Micro-Tech’s performance growth is import substitution, but the Company is facing some challenges in the short term, such as centralized procurement, pandemic, inflation, etc.
- Micro-Tech will face lower-than-expected performance growth in 2022. Since the whole series of products would be covered by centralized procurement, the valuation of Micro-Tech should be lower than Mindray.
- However, there are possibilities for Micro-Tech to achieve a turnaround (with bottom-fishing opportunity) if it could make a breakthrough in internationalization and product innovation. We recommend investors follow Micro-Tech closely.
Concord Healthcare Group (CHG HK) Pre-IPO: Accumulated Loss and Cash Burn Cloud Growth Prospects
- Concord Healthcare Group (CHG HK), the second largest private oncology healthcare company in China, has submitted application proof for an IPO on the HK Stock Exchange in May 2022.
- The company has an accumulated loss of RMB1.7 billion during the last three years, with current net debt-to-capital ratio of 170.1%. Its finance cost account for 92.5% of total revenue.
- Concord has a cash balance of just RMB136 million, which makes it hard to grab the growth opportunities in China’s capital-intensive oncology healthcare services segment.
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