Member Info for Jatw

No new pressure on MNG to change.

The property / debt crisis in China affects the sense of wealth in the economy - we have had a recent commercial property crunch in the UK, but not a house price crash for a long time.

I am sure Pru through ts funds in China will own some property and shares in some property companies. While they may not take big right offs directly, the flow of money into the China JV may be reduced which will flow into lower profit expectations.

Here’s the link to the company website:

https://www.hutch-med.com/shareholder-information/analyst-coverage/

There are two boxes that have a link to their research Topsperity and Trinity Delta. The TD link below works, the Topsperity link does not.

https://www.trinitydelta.org/companies/HUTCHMED/

The cash cost of the dividend is about £250m

They hold about £500m of PHNX stock they can sell, so they should be able to afford the divi for several years…..but I think it will be a sign of weakness if they have to sell their PHNX stake just to pay the divi. The next CEO will undoubtedly want to rebase the divi if he / she can justify it. 1 they can blame brd for the poor state of the balance sheet, 2 they can grow it from a lower base, 3 if the SP takes a hit they get their share options at a lower strike price.

Maybe they are taking over from Trinity Delta as the company sponsored research. There was 1p difference in their valuation which could easily be a slightly different exchange rate.

I looked at the analyst data on the website - they had expanded it significantly and had two links for further information TD worked, the other one did not work for me (may be a HK team). Cavendish was not listed, but that could be just timing.

Pru divested MNG and JXN for about £2.50 of value per share.

As it is now an Asia and Africa operator it has fallen foul of the souring of the Chinese story. The Covid restrictions limited new business in 20-23, some signs of decent recovery in 2024. The HK security law has taken its toll on the HK market which is down from 30000 to 18000. There is a property / debt problem in China which is not going away soon and US/China relations have been poor (fears for Taiwan and competition issues) resulting in increased tariffs, sanctions etc.

Pru specific things - their Health app may have been impacted by the failure of Babylon. They have replaced the old London based C suite. They dont pay a high dividend yield compared to London and HK listed rivals……their Asian investor base needs to be raised as it is largely a Western owned company.

On the plus side, they appear well capitalised and have a portfolio of well performing business units……they are going to change their capital management policy which may raise shareholder payments through dividend / buybacks (AIA recently updated its method). Although they will need to be sure they can continue to grow the business.

Most will consider it cheap at the moment….but we are anchored in a world where it was £15 for several years. When it does start to rise it may do quickly, but the China chill could continue to weigh heavily…..Hold for me as I dont want to sell at these levels

I have topped up my holding today in anticipation of a few years of 15-20% returns on the back on a strong annuity market both bulk and individual.

Mgmt has outlined plans for 15% growth which is double your money in 5 years.

I have bought 3500 today at prices between 282 and 285. I appreciate we are are between the year high and lows, but I think the balance of risk for HCM is on the upside and we have the following events to look forward to:

EU approval of Fruq. (July)

China approval of Fruq for Gastric cancer (July/August).

China approval of Sovlep (Aug / Sept - accelerated approval)

China approval of Fruq+Sint (Frusica-1) (Nov/Dec)

AZ to submit US NDA for Savo (Nov/Dec)

The first three should give rise to additional revenue in 2024, building further in 2025.

The Sovlep approval will trigger activity to source a global development partner (probably bringing a cash injection).

Marketscreener has a consensus profitability of 2024 loss $100m, 2025 breakeven, 2026 profit $100m. I suspect that does not include much in the way of milestone and partnership payments.

Thank you 1pencil. 550p is towards the top end of current estimates and roughly double the current SP.

IMO cavendish is bring conservative on the US Fruq sales of $200m. That is just an extrapolation of the first 3 months of the year which I consider a significant underestimate…..because we know from the Fresco data that Fruq is likely to be taken for longer than 3m so they will still be adding to the bank of patients under treatment and this will not peak until they have as many coming off as going on to treatment.

I have previously suggested various growth trajectories, i suspect we could see $75-80m in Q2 so a total H1 in market sales of $125-130m. If the steady plateau rate is $80m then this will add $160m in H2 giving $285-290m for US sales in 2024 and forecast $320m in 2025.

If the plateau is $100m / Q then this would be hit in Q3 and we could see $200m in H2 giving $325-330m in 2024 and a forward looking $400m in 2025.

I expect European sales will start in August, the market is 3x US patient numbers. We dont know the pricing or Takeda’s capability to take to market, so we can only guess at what sales will arise, but they could easily be more than US sales in 2025/2026 timeframe.

Direction of travel more important than the size….

Should also get a boost from the FT report today that Labour is not planning to reintroduce the LifeTime Allowance. That is probably better news for SIPP providers but it does no harm to have more certainty around large pension pots in Pension land.

Sounds like a positive assessment - for those without access to the report, did they assign a rating? Or have a view on value?

HCM has initiated a new drug into clinical work (506), this follows Amdizalisib, and 306.

It appears that there is significant competition in this space with Beigene / Innovent etc progressing product……

Amdiz seems to have dropped off the main developments or atleast has moved to 2027/28.

If they have another significant delay (I am not sure we can call it a failure) to another programme, then maybe management should punt all the blood cancer work into a JV with another player to rationalise the pipeline costs.

LearningG,

The July results are a sales update near the end of July. The H1 financials are not out until September. Previous years RNSs give an idea on the timing if there is no formal calendar entry.

Eyes will be on LGEN next week when they hold a capital markets day.

If LGEN resets its capital returns to have regular buy backs and a reduced dividend, then MNG may follow suit.

I see it as rather pointless being locked into a £500m dividend payment if £250m dividend and £250m buy back has the same / better reception in the market.

MNG does not own these properties itself so the direct impact is on the funds that hold the property…..MNG experiences lower fees where these are % based…..limited effect unless this becomes common across the commercial real estate sector.

The obvious is something that stirs the SP into an upward swing…..

The sale of CALA has been flagged, maybe some under performing elements will be slated for rationalisation / sale.

A buy back (presumably using the CALA sale funds) is also widely expected.

There could be a change in dividend…..to provide more flexible capital returns,

A quarterly smaller dividend would have less impact on the share price and if reduced by 50% provides cash for more regular buy backs in future….

Expect an update on where capital will be allocated for best returns and the potential impact of PRA action on funded reinsurance.

What would you like to see Mr Simoes announce?

Have caught my eye:

1 NHS starting a trial a vaccine treatment for rectal cancer that has been resected. This is a long way from being a treatment, but could reduce the flow of patients into 2L /3L mCRC. I suspect as it is an individualised vaccine it will be £££.

2 NICE has refused to endorse Enhertu for certain breast cancer patients despite efficacy, it says the price is too high. With a quality adjusted life year value of £20-30k that NICE wants to achieve this is an effective cap on UK cancer treatment costs. This will then flow into other European value assessments. Takeda will be moving into European markets with Fruq in H2, it shows there may be some pricing issues and delays in take up as governments do their value assessments.

I mention these for interest and examples of potential competition and commercialisation issues ahead…..

Apparently NICE requires a lower price for Enhertu to recommend it for HER low breast cancer.

Proposed pricing must be higher than £30k pa.

Updates include

Takeda sales

Changes to registration studies

More detail on some of the late stage assets in development.

Sustainability measures.

Markets dont like political uncertainty.

It seems whatever coalition emerges will see a lurch either to the Right (market postiive) or radical left (not so positive but depends on how much power ANC has to cede).