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This is the official line, have the Hutchmed board seen this?, if so what measures are being taken in response?
"The regulator also urged listed companies to bolster their value through share buybacks, stock purchases by major shareholders, regular dividend payouts and merges and acquisitions."
https://www.reuters.com/markets/asia/china-regulator-unveils-more-curbs-short-selling-2024-02-06/#:~:text=BEIJING%2FSHANGHAI%2C%20Feb%206%20(,efforts%20to%20curb%20short-selling.
With the right incentives in place, owners and executives should be aiming to advance share prices…..when the regulator has to remind companies of this, there must be great concern about popular discontent in the CCP.
I don’t think the HCM board is in a position to declare it has excess assets to do a buy back yet..although that is quite a likely outcome in 2026/27…..but it might see short term opportunities to buy mainland operations…..the regulatory door would appear to be open to this…and if you dont pay much premium over the hard assets acquired there is limited risk..
Thank you both for posting this here .
“The regulator also urged listed companies to bolster their value through share buybacks, stock purchases by major shareholders, regular dividend payouts and merges and acquisitions…”
Precisely, what we have been shouting from this messaging platform for many days!
Its going t be very difficult for the board to just ignore these requests, not only are they coming from shareholders but government regulators too.
Copy and link article to board, more the merrier imo.
Mr To is CKHH’s man…..he will get his orders…..difficult for the Board to do anything that CKHH does not want.
HCM itself is too small and not yet listed in the mainland so will not be on the radar of the chinese financial market regulator…..the same cannot be said for China legacy pharma, esp those with CCP owners.
BTW when do you think HCM will be making sufficient profits to enable significant returns to Shareholders? I cant see this until 2026/27. The 2024 NDAs should lead to marketing approvals during 2025 and first full year of sales in 2026…..so that is my earliest timeframe for determining excess capital.
That’s is correct. We agree, this company is not going to give any dividend for, at least, another couple of years.
What about Mergers and acquisitions? It is also mentioned in the circular. Jatw, what is your opinion regarding lack of ‘interests’ , so far, from other major companies? Market capital is less than $ 2.5B as per today’s data.
I think there is probably a moral obligation as Hutchmed is HK based and listed, not to mention a large proportion of its sale and development originate in China.
HCM is listed in HK which will mean at least some exposure to these initiatives via the ETF purchases, don't think they are done yet..
https://www.cnbc.com/2024/02/07/china-appoints-markets-veteran-wu-qing-as-new-chairman-of-securities-regulator.html
Cash flow is strong with enough capital reserves to support a modest (see SFOR) share buy back, free float is only around 20% so 5% should be more than enough imo.
A 5% buy back would cost around HK$1bn or £100m/ $130m.
I just dont see the Board doing it on current revenue visibility - there is too much uncertainty to be sure of being cash positive from drug sales. Of course if they land an international partner for Sovlep, then a large upfront payment may change the picture somewhat.
As for M&A, CKHH will need to be persuaded of the merits….a deep pocketed Western pharma can easily afford HCM even with a 100% premium….local offers may be more share based with lower premium…there are significant cost savings to be realised with overlapping programs with Innovent / Beigene etc but we dont know whether there are change of control terms in the licenced products that could strip product value out of any deal…it is complicated when potential M&A partners have competing licensing arrangements..
HCM at the end of H1 had $850m in cash and growing, R & D is on the decline, plenty for incremental purchases over 12-24 months.
Checking the register with the public info shows no change in major holders for sometime, buying back 5% would take some time and may not be successful due to illiquidity and/or rising share price
Alibaba has just announced a further increase up to 2027
'Alibaba said the $25 billion increase is added to its share repurchase program through the end of March 2027, bringing the total available under the plan to $35.3 billion.'
Bit early to assess fully, but drop in HCM shorts by 12% or so..
https://www.sfc.hk/en/Regulatory-functions/Market/Short-position-reporting/Aggregated-reportable-short-positions-of-specified-shares
Healthcare services will be a main area of focus for HarbourVest’s China investments this year, as the country’s ageing population and growing household income drive demand for “more premium and better healthcare services”, including outpatient treatment and elective surgeries.
https://www.scmp.com/business/banking-finance/article/3251567/china-drive-private-market-opportunities-asia-healthcare-consumption-offer-pickings-harbourvest