Brief Hong Kong: CStone Pharma (基石药业) IPO: Thoughts on Valuation (Part 2) and more

In this briefing:

1. CStone Pharma (基石药业) IPO: Thoughts on Valuation (Part 2)
2. Semiconductor Sales Dive A Record 7% MoM In December. 2019 Will Be A Low-To-No Growth Year.
3. Capital Flows Return To Asia and India

1. CStone Pharma (基石药业) IPO: Thoughts on Valuation (Part 2)

CStone Pharma, a Wuxi Apptec related biotech company, plans to raise USD 300m to list on the Hong Kong Stock Exchange. In our previous insight (link here), we have discussed CStone’s drug candidate pipeline, founders, management team and investors.

In this insight, we will provide a detailed valuation breakdown for its key products. Our base case post-money valuation for CStone is USD 1.4 bn, which is 30% above its pre-IPO valuation of USD 1.05 bn but at the low end of the guided valuation range. 

• CStone Pharma (基石药业) IPO: Strong Assembly and Backing (Part 1)
• Viva Biotech (维亚生物) IPO: When CRO Becomes Early Stage Biotech Investor
• Hansoh Pharma (翰森制药) IPO: Takeaways from Recent 4+7 City Centralized Tender Results

• Hansoh Pharma (翰森制药) IPO: A Leading Generic Player with Regulatory Overhang (Part 1)
• WuXi Apptec (药明康德) IPO: This A+H Listing Will Be Different

• Frontage Holding (方达控股) IPO: More Disclosure Needed to Understand Moat and Growth Prospect
• Ascentage Pharma (亚盛医药) IPO: Too Early for an IPO
• Junshi Bioscience (君实医药) IPO: Thoughts on Valuation (Part 2)
• Junshi Bioscience (君实医药) IPO: Early in Application but Behind in Key Indications (Part 1)
• CanSino Biologics (康希诺) IPO: Promising Pre-Clinical Results but Vaccine Scandal Weighs (Part 1)

• AOBiome Therapeutics IPO: Hope for Natural Therapeutic Treatment
• Innovent Biologics (信达生物) IPO: Pricing the PD-1 and Biosimilars Competition (Part 2)
• Innovent Biologics (信达生物) IPO: A Major PD-1 MAb Competitor Might Have Just Emerged (Part 1)
• MicuRx Pharma (盟科医药) IPO: Betting on Single Drug in the Not so Attractive Antibiotic Segment
• Hua Medicine (华领医药) IPO: Thoughts on Valuation
• Hua Medicine (华领医药) IPO: Reviving Roche’s Failed Attempt?
• BeiGene (百济神州) IPO: Dual-Listing with Upside Capped in the Near Term
• Ascletis Pharma (歌礼制药) IPO: Valuation Not Justified by Ganovo and Ravidasvir NPV (Part 3)
• Ascletis Pharma (歌礼制药) IPO: Three Valuation Risk Factors (Part 2)
• Ascletis Pharma (歌礼制药) IPO: Emerging Player in the Crowded HCV Drug Market
• China Isotope & Radiation IPO: Oligopoly, Visible Growth and High Barrier to Entry
• Zai Lab IPO: Thoughts on Valuation, Risks and Upsides (Part 2)
• Zai Lab IPO: Experienced Team, Promising In-Licensing Drug Pipeline (Part 1)

2. Semiconductor Sales Dive A Record 7% MoM In December. 2019 Will Be A Low-To-No Growth Year.

Global Semiconductor Sales for December 2018 amounted to $38.2 billion, down a record 7.0% MoM, according to the latest data published by the Semiconductor Industry Association (SIA). The December data reflects a sharp acceleration of a downward trend which began in November and comes as little surprise following an earnings season characterised by profit warnings led by industry giants such as Apple, Samsung and Nvidia. 

The December decline amounted to ~$3 billion in absolute terms, far less than the roughly $15 billion that failed to materialise in fourth quarter sector revenues and implying that substantial amounts of inventory still remain to be consumed from within the supply chain. 

As such we anticipate monthly semiconductor sales continuing to decline through April-May timeframe before stabilizing and returning to growth thereafter. We now anticipate growth to moderate significantly from the 13.7% experienced in 2018 to just 1% in 2019. 

3. Capital Flows Return To Asia and India

• Latest January ‘flash’ data show cross-border capital returning to Asia
• Asian EM and India favoured
• Reinforces similar evidence in December and helps reverse big outflows a year ago
• Adds support to our view that Asia is leading the Global cycle higher