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Scotty Kilmer, not really anything to do with Hutchmed but has a few words on US/China relations which I think has some merit, he speaks a lot of sense on a range of subjects which resonate with a lot of people.
https://www.youtube.com/watch?v=buL7YuB2OgM
We are seeing above average volume on these upward moves, if HCM can consolidate around 270p area then 325p should be achievable on a positive outcome
HK short data, small reduction but going the right way - not sure how much actual use these figures are as delayed.
8,715,618 > 8,600,618
We are still way under valued on all metrics including DCF compared to Beigene and Innovent, something that must surely correct itself at some point
The actual movement on the day may well be negative…..depending on how many short term traders are looking to book a profit after running the price up…. buy the rumour and sell the fact. …..it is entirely possible that today’s price already reflects the expected approval…but we suspect the price of this share is somewhat detached from prospects.
a thorny subject jatw - i was in hk the day fru*****inib was approved, which as you will recall was hutchmed's first every approved drug - the share price went down quite significantly, so i am not sure what the market will do.
that said, the first ever global approval should be more significant, even though it's now out licensed to takeda
325p sounds fair, and maybe we will get quite of lot of short covering to help
Anyone like to offer a guess for the share price the day after the PDUFA decision?
I’ll start:
Approved - 325p (I think we will see the recent upward trend continue as approval unlocks further value)
Not approved 150p (I consider this unlikely given the priority review and the medical experts commentary and it would shock the market)
Hutchmed starting to stand out a bit more with Takeda backing, BeiGene not so lucky.
I am not a chartist…..but there does seem to be some generally upward momentum in the 3m shareprice.
Third of daily NASDAQ volume traded in first five minutes?
Hopefully shorts covering ahead of PDUFA in a few weeks time
Up >9% in HK today with >6m volume..
HK following NASDAQ with reduction of short interest, been a while but around 18% drop between 1st - 8th Sept reports
Just figured out what happened, it went into extended auction adding another 5 minutes to the UT trade hence 16.40 UT
There must have put a lump on to buy outside of daily trading range triggering extension.
Very strange….some sort of glitch….there is no equivalent movement on NASDAQ, maybe these trades will be unwound as errors….but I dont expect they will influence Monday’s prices in HK.
Never seen that before whole bunch of AT trades after the bell, bit of size too at least for HCM
Clearly not expecting huge gains in the short term……just needed some cash.
First time since May short interest on ADR's has dropped under 1m shares, not huge but then again the volume across the pond has been small also, yesterday for example just 67k of shares.
In real terms that's probably close to 2 months trading even though NASDAQ site quotes 12 days.
So with some distance now from the defenestration of Mr Hogg, we tend to think it was the right decision?
A different strategy and a more flexible Board being the result?
A big plus for me is Hutchmed board, they have listened to shareholders and changed direction accordingly - this suggests they are at least flexible and therefore may well entertain being part of a larger group, that's my theory anyway.
I am not sure why different valuations should apply, butI offer a couple of thoughts related to the ownership structure and where shares are held.
HCM has a 38% block owned by CKHH…it was much higher, but nothing can happen to HCM without CKHH say so….this works both ways…in theory they can stand behind the company should it ever be in difficulty, but it can be a drag if they are passive and not pushing the business hard enough.
I don’t think Innovent / Beigene have such a single dominant shareholder (but I am happy to be corrected)….the free float is not that great once the various long term PE holdings are discounted so it may not qualify for indices or meet some investors criteria.
HCM does not have a mainland listing…..with large US and UK registered shareholdings and so has been more affected by geo politics?…
Finally, I think HCM pursued its own global ambitions for too long. As a result it spent too much on global costs and in-licensing to build China sales has lagged.
Growth company metrics are all over the place because each company is at different stages of development……as they mature the metrics are likely to converge with other China bios and western operators…in the meantime there will be disparities that may be investment opportunities.
No worries davey, its always good to have discussion especially during turbulent times.
In terms of valuation models, these are both probably still valid but not something hedge funds will take much notice of, otherwise I doubt we would be at this level.
Either the funds going short are trading volatility with a pairs trade, or they have some other cover call options perhaps - looking at Qube recently which move up and down short on THG, they hedge themselves with a humongous put option - goodness knows what the premium is to write that but that's their strategy.
The upside of course for those investing is it can create once in a lifetime opportunities, that is, if you can stand the volatility and wait it out ..
One other thing to consider is many hedge funds underperform the S & P, take a look at Systematica flagship Ai fund (blue something or other), terrible performance last 10 years despite having the best brains and tech to play with.
Thankyou as always jatw and 1pencil fir your excellent insightful posts, always a great read
As you know, I’m always bemused by Hurchmed’s valuation and wondered if you had any thoughts as to why innovent is valued on much higher metrics such as P/S and DCF compared to Hutchmed….
Maybe they plan on buying something ..
(lol)
I recognise my words….quite why Innovent needs new funding escapes me but I doubt they have been as prudent as HCM in trimming their R&D costs and they did not get a large wedge from their partner. Sanofi had an option to buy such a tranche of shares and maybe they have declined the opportunity.
Anyway, similar trajectories beckon and I remain positive on both…still no idea why the market was up yesterday.
Hutchmed highlight (literally in yellow) their strong cash position of nearly $900m, there's also a further $44m sat on SHPL balance sheet but this is offset by similar amount of borrowings.
Didn't Innovent recently report strong cash position?
"Yes, indeed, Innovent produced strong financials after the market yesterday. They raised revenue by 20% and they are very close to an operational profit and have $1.2bn in cash. They are at a similar inflexion point to HCM - but are larger with a more extensive product set and partnerships, including a strategic investment by Sanofi. I am hopeful the two companies will follow similar paths to success. We can all do with some diversification."