Member Info for Jatw

Todays update shows that investment performance has turned a corner and such movements will usually result in better asset allocations by clients which will turn client cash-flows around.
While the shares have gained 30% from recent lows, there is more to come when net client cash flow turns positive……..now a much safer business to hold.

I suspect the CNY which closes the HK market 23-25 Jan and stock connect for further days either side could be affecting volumes in HK which were higher today…..
The NASDAQ will be in charge for the holiday period and has been more negative recently….other Pharma rose strongly in HK so HCM moved broadly inline with its peers…although NASDAQ was -3.5% in the after market so there are clearly different pressures coming to bear.
Let’s see, but there may be a sharpish pull back during the CNY HK closures and a rebound on reopening?

Bit premature…given todays “disappointing” trading update.
Strong revenue but they clearly experienced a change of sentiment amongst their customers with a dip in December trading……was that customers preserving their YE cash position? And adopting a cautious wait and see approach? They certainly were not buying ahead of list pricing increases…..

A 25% fall is to be expected….

Thanks Rivaldo…..
My simplified view of their business model is acquire rights to product through acquisition, continue developing them (product and brand), push distributors to take a wider range of product to increase volume and value of sales.
The manufacturing operations are in-house, typically they have excess capacity and that does not seem to change when they make acquisitions so their efficiency should improve through increase sales volumes and consolidation (none reported so far).
When the numbers are reported I expect to see top line growth in sales and margin improvements from more efficient operations and sales / marketing costs…..and central costs including financing under tight control…..
I think that is what they are promising shareholders…and ‘new VLG’ (which is what I call the businesses acquired using the funds raised a couple of years ago) seems to be delivering this, although the market value of the company would suggest otherwise….
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Key risks:
Overpaying for acquisitions. (Includes unrealistic expectations for stretching the brand / products)
Existing brands becoming tired and losing value.
Rogue distributors who cant pay.
Management competence to oversee an increasingly complex business and to run it efficiently.

I wonder what the Directors intend to do in the medium to longer term….will they continue this approach with the aim of growing incrementally larger, will they attempt larger deals increasing the M&A risk or do they have an exit plan to sell to a larger player?

The CRO and CFO as well as the CEO have been asleep at the wheel……the Institutional Investors will need to be thrown a head or two - the Board needs to appoint new executive management and soon.

Updates include:
Slightly more detail on 2023 NDAs.
Additional ITP landscape as context for Sol
Limited Updates for other pipeline progress
Appendix has a much slimmed down management structure.

Clearly awaiting big new on global partnerships for Fruquintinib and others…..
I think it is time for them to give quarterly sales updates……revenue growth is what they are about now…..and HY financials seem too far apart……they could surely tell us the actual pharma sales in China in 2022 now rather than leaving it as a USD160-190m range from August last year.

Renewal premiums quoted to customers are significantly higher….insurers have the means to reprice back to profitability…..unless there are some loss leading companies out there burning through cash…..
Heading for a period of plenty once the cost spike passes through to customers.

And M&A is alive and kicking…..
Today AZ buy CinCor $1.8bn and IPSEN buy Arbelio $950M + 25% Contingent value

It would seem NASDAQ reacted to this news last week……..

Cincor swim?
A smallish deal at <1.8bn….so far their dealings have proven good decisions, esp Enhertu and Alexion has made pipeline progress……hope this adds value in the medium term.

Enabling usage of RENX products is a great idea……and this project should expand sales in time…..a reason for the company to raise its valuation and for new funds to be forthcoming from investors….of course FDA approval and more immediate sales will be the deal makers.

Interesting decision to license the new mouth ulcer product to a distributor rather than to invest in developing an internal brand……surely not much of a stretch to extend mouthwashes to treating ulcers…..or to distribute under VLG brands…..suppose it could just be a market position issue and this product will be sold by VLG in other markets under a VLG brand.

Other contracts show global development and increasing product reach…..lets hope they keep a close eye on these distributors and can collect the cash from these markets.

The market seems to have anticipated the ‘normalisation’ of the HK/CN border starting next week…..this should help with 2023 sales but will presumably continue to be a drag…..however with increased connectivity from China to invest in HK vehicles there may be a systemic change an mainland business may become the preferred solution for chinese mainlanders……Pru needs to work out its approach in China - will it increase its stake in the CITIC Pru JVs? That should be preferred to building a new franchise.

The recent 50% gain reflects the oversold nature of the stock, and surely reflects some over optimism, so like AS I expect a pull back soon, but there is still room for gains over 2023 from this position, still 40-50% upside before the share get back to the share issue price in HK which is the HKD/USD value I would use to assess valuation given this is now a $ stock. £ price is affected by a 15-20% fall in £ relative to $, so the old £15 is closer to £18 now…..

The market has been wild this past year……from 550 down to 130 and back to 300 in no time at all…..and nobody seems any the wiser about what HCM is worth……
The strategic change to be more commercial and less of a science experiment is very welcome….may the PE investors continue to push for cash generation…..they need to get the ADS price back to 30USD to break even and that i would say is the minimum price for a takeover…

About the new year market rally……VLG missing out and going backwards rapidly…..
Looking forward to a positive business update at the end of January containing 2022 sales data…and ‘new VLG” performing strongly…..

with the NHS in such disarray and bad news everyday about treatment delays self care should be on the up? (Yes - many of VLGs sales are overseas but home market sales should be outperforming)

Last year there was a business update in mid January.
Hopefully this will be repeated…..and they can give an indicative view of the IFRS 17 changes, plus report what should be a bumper round defined benefit solutions.

The long view is all about China, its continued progress of its peoples in getting better off and needing investment / insurance products and its wider influence on the macro economics of Asia…..
Pru is now an excellent diversification play for UK investors….its fortunes should not depend much on the UK government and UK prospects.

Thinking about this further…they started enrolling patients in October 21…..so they should have most of the timed assessments done and a pretty good idea about what the data is telling them……but they do need to complete the study as designed to properly support the endpoint results….the initial study results were encouraging but only on a small number of patients….they would expect the effects to be observable in the same way but for the metric to firm up around an average rate of response and duration.

Timing is on track….the investor presentation suggests the measurement point is 24 weeks, so the numbers should be evaluable around half year results time.
ITP had a large target market per previous presentations…..so if favourable could be a significant win……also had breakthrough treatment designation in China for a fast track approval, so could be approved mid 2024 if all goes well.

Asian markets have been reacting positively to China changing its approach to Covid and this is benefitting Pru where new business is weighted towards HK and its cross border business.
I am not so interested in the 2022 results in mid March, but will be much more interested in what management has to say about the direction of trading, the effect of implementing IFRS17 which they have not commented on yet and any change in strategy and the new CEOs views.
They have a number of issues to resolve:
Selling down the Jackson stake
Strategy for their JVs in China and India (mainly)
Scaling up in Africa (more territories and in market growth).
Encouraging HK/SNG shareholders to build these listings as I would be disappointed if Pru still has its primary listing in London come 2030.
I expect some limited restructuring of the Group and major investment in online distribution and servicing.
Financially, I hope they will be able to maintain the 12-15% growth rate and grow the dividend similarly.