Whether privatization is reasonable depends on whether the price is in line with the valuation level. With the current price premium of 34.11%, privatization of almost 1.05 pb (Pb caliber at the end of 2023) is OK.
[Headline announcement Nuggets]
Chinese Traditional Chinese Medicine (00570): Received a premium of about 34.11% from Sinopharm Group's Gongyu and the privatized formula granule business showed restorative growth
Zhitong Finance App News, China Traditional Chinese Medicine (00570) and the offender Sinopharm Group Gongyu Co., Ltd. jointly announced that on February 9, 2024, the offeror requested the board of directors to submit proposals to the planned shareholders to privatize the company. If approved, it would lead to the cancellation of the stock's listing status on the Hong Kong Stock Exchange. The cancellation price of HK$4.6 per plan share cancelled in cash according to the plan is about 34.11% higher than the closing price of HK$3.43 per share reported on the Hong Kong Stock Exchange on the last trading day. The company has applied to the Hong Kong Stock Exchange to resume share trading from 9:00 a.m. on February 22, 2024. The company expects net profit to increase 85%-95% year-on-year in 2023.
Comment: Whether privatization is reasonable, the key depends on whether the price is in line with the valuation level. With the current price premium of 34.11%, privatization of almost 1.05 pb (Pb caliber at the end of 2023) is OK. The reason for privatization is that the company currently has limited functions as a public financing platform; after privatization, it is conducive to streamlining the company's governance, enterprise and equity structure, and improving management efficiency. Ultimately, success depends on whether the shareholder Ping An Life agrees, because the return on investment over the years has not been significant at this price, and of course it is not ruled out to make a compromise with returning the funds in a hurry due to lack of capital. It opened on the 22nd. Considering that the privatization process takes half a year, there are capital costs, and there is also a risk that the privatization implied vote will fail, so it is expected that there will be discounts. If the discount is less than 0.85, you can consider risk-free arbitrage, which is not very interesting.
[Key Announcements Nuggets]
JD Health (06618): The share reward program was adopted, and the first entry advantage in the distribution network continues to improve
According to the Zhitong Finance App, JD Health (06618) announced that the company will issue 500,000 new shares on February 21, 2024 in accordance with the adoption of the initial public offering after-sales share incentive plan on November 23, 2020. The company's net revenue and profit both increased in the third quarter of 2023.
Comment: The JD Health Share Offering Award Program is expected to catalyze performance. JD Health is the largest online healthcare platform in China. It is also a leader in the digital transformation of the medical industry chain. Relying on the “first entry point for online health consumption”, JD Health became the “first stop” for many well-known pharmaceutical companies; in 2023, many new specialty drugs, including the innovative diabetes drugs Saiyining and Adalox, the new anti-tumor drug larotinib, the new anti-AIDS drug Compound, and the new drug Upatinib sustained-release tablets to treat atopic dermatitis, were launched one after another at JD Health. Recent catalysis: Recently, JD Health and the global pharmaceutical company Daiichi Sankyo (China) Investment Co., Ltd. reached a cooperation. The company is headquartered in Tokyo, Japan. It is a multinational pharmaceutical group with a history of more than 100 years and strives to become a “global innovative pharmaceutical company with competitive advantages in the field of oncology.” Win-win cooperation is expected to bring growth. Currently, offline pharmacies are overcrowded, profits are declining, and online advantages are constantly improving. With the liberalization of online drug purchase policies, users can also make online medical insurance payments. This is undoubtedly a major catalyst. Last year, JD Health officially launched the medical model “Beijing Medicine Thousand Investigations”, which realizes AI upgrades for applications, products, and solutions in different medical scenarios. At present, the medical model has become the technical foundation of JD Health and will continue to help innovate telemedicine services.
[List of important Hong Kong stock announcements]