Health Care: Arrail Group, Ascent ENT Group Holdings, Invitae Corp, Alkem Laboratories Ltd, Top Glove Corp and more

• Arrail is a leading premium dental service provider in China. The company launched book building to raise up to USD 87m via a Hong Kong listing.
• In our previous notes, we looked at the company’s background, its operation, its financials, and its expansion plan, and compared its key metrics with peers and provide thoughts on valuation.
• In this note, we provide a quick update for the book building.

• Arrail is the largest dental services provider in China’s premium private dental service market and the third in the overall market in terms of total revenues in 2020.
• The company has filed for an IPO to list on the Hong Kong Stock Exchange and plans to raise about US$86m.
• The group has experienced strong growth despite the impact of COVID-19 and China’s growing private dental market offers large potential for the company to grow.

• For ENT services, the number of patients and scale of ENT field are relatively stable, with growth ceiling.
• Due to the limited doctor resources in Singapore and the intensified multi-party competition faced by Ascent, there may not be exciting future growth potential.
• So, we are conservative about the Company’s outlook if it just operates the business within Singapore or without diversifying its business effectively.

• This model seeks companies facing dangerously high leverage coupled with negative or declining cash flows.  It considers interest expense, capex and short term maturities for additional input. 
• The companies may not be viable given cash flows and capital structures.  These shorts tend to have  higher betas  and can have strong down moves as the crisis is recognized.
• This week we flag: Invitae, AMC, 2U Inc., and Delek US

• After MNC Pharma and pure-play companies like ERIS, ALKEM has minimal exposure to the international business.
• It has multiple growth drivers over the next 12-18 months, despite a high base in the past 12 months, due to: a revival in Non-COVID therapies and better MR productivity (14% net addition over the past two years), sustained outperformance in Chronic.
• .

• Profit fell short
• Profit more than halved YoY and QoQ
• Highlights from 2QFY22 concall
• Earnings adjustments

TOPG’s 2QFY22 net profit of MYR87.5m was below our and consensus full-year estimates. Management expects margin outlook to stay challenging on rising raw material costs, partially cushioned by better utilisation and efficiency rates. TOPG remains cautious and has scaled back on its expansion plan. It has also put its Hong Kong listing plan on hold for now. We lower our FY22/23/24 earnings forecasts by -40% to -48%. Post earnings adjustments, our TP is lowered to MYR0.91 (on an unchanged 13x CY23 PER). Maintain SELL.