In today’s briefing:
- Hisamitsu Pharmaceutical (4530 JP): Mixed Q2FY24 Result- Some Points Worth of Paying Attention
- WuXi AppTec (2359.HK/603259.CH) – Would the Recent Rebound in Share Price Be a Flash in the Pan?
- No Danger in Being Long
- Manager’s Real Intent to Prevent Further Increase in Ratio of Independent Directors Is Revealed
Hisamitsu Pharmaceutical (4530 JP): Mixed Q2FY24 Result- Some Points Worth of Paying Attention
- Hisamitsu Pharmaceutical Co (4530 JP) announced mixed Q2FY24 result, with single-digit revenue growth and bottom-line decline. Revenue grew 5% YoY to ¥34.9B, while operating profit declined 8% YoY to ¥4B.
- Salonpas line of OTC pain relieving patches have become major growth driver of the company. In Q2FY24, Salonpas revenue increased 14% YoY, lowest growth rate reported in last five quarters.
- Despite 70%+ progress of operating and net profits, Hisamitsu reiterated FY24 guidance. Declining margins, anticipated increase in SG&A expenses, and high base call for massive fall in profit in H2FY24.
WuXi AppTec (2359.HK/603259.CH) – Would the Recent Rebound in Share Price Be a Flash in the Pan?
- WuXi AppTec’s share price has performed well recently, mainly driven by CXO’s “immune attributes” to anti-corruption campaign, investors’ bullish view of weight loss drug business, and the previous oversold rebound.
- Peptide CDMO business would contribute limited incremental performance to WuXi AppTec considering overall large business volume.Downward trend of CRO business is hard to be hedged by weight loss drug business.
- Due to higher-for-longer rate, China CXOs only have rebound value, but no reversal logic. It’s time to consider taking profits in a timely manner before the share price falls again.
No Danger in Being Long
- The 1,350p offer for Ergomed Plc (ERGO LN) (28% premium, 18.9x EV/Fwd NTM EBITDA using IBES estimated) seems optically attractive considering share underperformance, and in line with closest peer Medpace at 19.06x.
- Nevertheless there’d be synergies available to a trade buyer and other than 18% from the Founder, there aren’t any other irrevocables, which indicates the offer price is far from knock-out.
- I set my TP at 1,350p. Spread turned negative last week, now 0.59%/1.71% (gross/annualised, assuming settlement by mid-February). I would be long considering there’s still time for a competing offer.
Manager’s Real Intent to Prevent Further Increase in Ratio of Independent Directors Is Revealed
- The Kankeiren intends to prevent further increases in the ratio of independent directors because of the small number of candidates for outside directors.
- One reason why the substance of the Corporate Governance Code has not improved is that independent directors are a minority on the board.
- The company is also responsible for not developing female internal executive director candidates, relying on outside directors for female directors, and not appointing foreign talent to the board.
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