Member Info for daveycaferacer

FT and Yahoo articles suggesting Chinese Regulator will concede:-

https://www.ft.com/content/0463c70d-4d24-4b9b-b7e5-ace22409d8e2

https://finance.yahoo.com/news/china-tech-stocks-rebound-dip-012706093.html

You have to love the way this is reported

"• Zai Lab (NASDAQ:ZLAB), BeiGene (NASDAQ:BGNE), and Hutchmed (BGNE) were recently flagged by the U.S. Securities and Exchange Commission (SEC) for alleged violations of a key U.S. law governing accounting regulations for foreign companies."

there are no alleged violations whatsoever, they simply have to comp,y with the new rules, they doesn't mean they have broken those new rules. just lazy journalism....

I have always been mystified as to why Hutchmed hasn't sub-contracted the manufacturing outside China to a 3rd party - there are plenty of GMP approved ones to choose from. On another note, we are also expecting approval from the EMA soon too.

hopefully shorts are getting stuffed

thankyou for another insightful post pencil

it is a long way off but if we don't have a quick resolution to the issue my concern is this will be a constant drag on valuation even if the company's growth trajectory continues.

I agree with those 3 possible outcomes tacly
I hope and expect point 1 will be achieved, if not then point 3. If they are tempted to take the company private that would be a terrible betrayal towards investors but given CKHH have form on that (remember the botched placing in Dec 2018?)

To my mind all the Analysts can do their DCF analysis, forward projections for revenue, EBIT and cashflow and the entire exercise has been and will continue to be a complete waste of time for Investors. It seems to me that the valuation of the company is almost entirely based on regulatory spats and geopolitical risks. All the usual and well recognised practices for valuing a company are now worthless.

Brad Loncar hasn't sold down and he runs the Loncar China ETF which is stuffed full of China Biotech's, mostly HK listed, he also has a number of NASDAQ and dual-listed listed ones

Listening to his weekend podcast Brad did see it as an issue but clearly even he has been wrong-footed here in terms of the impact

I'm not thinking of selling, my implication is others may not know what to do but to be fair, even if they are de-listed from NASDAQ that doesn't mean the company is worthless, or indeed worth less. This complete over-reaction will correct itself in time.

almost 7 years of growth wiped out

buy, hold, sell? Who knows, it's just gambling now

China's Security Regulator comment on the PCAOB fiasco...

httTps://mp.weixin.qq.com/s/IiWEcvsETtL8cZ7zg4sVAgChina's Security Regulator comment on the PCAOB fiasco...

a bigger concern is the FDA inspectors can't do the physical GMP inspections at the moment due to travel restrictions

CNBC “The fundamental value of these companies will not be affected”

Well to me the fundamental value is meaningless if, as an Investor, you cannot realise it….. in other words Hutchmed has a theoretical value of circa $6bn but it’s no good if the market values it at $3bn

All the Directors own tranches of OS's and ADR's - Simon To owns circa $2.5m ADR's, Christian has a lot but I can't recall the exact amount, Edith Shih has around $2m in addition to OS's. That should focus their minds although they are at the behest of the regulatory spat just like the rest of us. One wonders whether the current valuation metrics are here to stay and the usualy Analyst DCF valuations are now a complete waste of time. I was banking on their future cashflow and other projections driving forward the company valuation but I now have my doubts. I have no idea how to value this company now.

yes, I assume they were aware but looking at the decimation of the share price whatever the market, it hasn't helped them much. They've still lost a lot of money.

I have never seen 21/22 posts in a single day on Hutchmed, that is certainly a record

agree 100% again pencil

The issue appears to be that even though HCM use PWC, they use the china arm of PWC and there appears to be a question over whether the chinese regulator will comply with the SEC demands. That is my take on it anyway. I agree with your worse case assessment but I do wonder if they will also ditch the london listing, although I hope not. In the meantime I am trying to work out how a U.S de-listing wil impact the long term value of the company. I assume if it were to happen in 2024 it will just be a continual downward drag on the valuation until then.

In the meantime the Enterprise value is currently greater than the mcap so we are trading at a discount.

interesting to note that the stock was being dumped a few days before the results, some realising that they would be added to the list as soon as they filed their results. I wish I'd had the foresight to have done the same.

https://www.scmp.com/business/banking-finance/article/3170075/shares-hutchmed-and-four-others-named-us-secs-audit-list