PW Medtech- Undervalued stock worth >3x the current market cap!
Cập nhật
PW Medtech Group Limited, an investment holding company, operates as a medical device company in the People’s Republic of China. The company manufactures and sells infusion sets. CBPO is a blood plasma products firm in China with a U.S. stock listing. It is one of the top three producers of plasma products in China with ~12% M/S.
Why interesting?
Company agreed to subscribe for 16.66% of the enlarged issued share capital of CBPO in consideration of all the issued shares of Health Forward, which in turn owns 80% equity interest in Tianxinfu (share swap). CBPO has 12% share in the blood plasma market in China and this industry is an oligopoly growing at GDP + rates.
Key highlights:
1. Super cheap: Note that CBPO listed in US has mkt cap of US3.7B. So, company would have US620M just from this stake and this is much higher than PWM's market cap of US204M. Now company has US
68M worth of debt so even if we say PWM's OPCO is worth 0, we get intrinsic mkt cap of US552M (=620-68). Suggest at least 2x upside from here.
2. Company (OPCO) has been making infusion sets but now expanding towards insulin needle and insulin pen businesses which are high marging businesses. Company claims to have much cheaper product than peers while obtaining high margins. Big capex was already spent which lowered ROIC for the moment but will rise once production is ramped.
3. Stock buyback & insider purchase during 2018~19 at a much higher price
Risk is that there may be another bid to acquire more shares of CBPO which means no hurries to divest CBPO shares at the moment. CBPO is co-invested with couple of prominent PEs including Hillhouse. RE-listing to HK stock exchange could be on the cards (e.g. 3S BIO) but not sure.
Why interesting?
Company agreed to subscribe for 16.66% of the enlarged issued share capital of CBPO in consideration of all the issued shares of Health Forward, which in turn owns 80% equity interest in Tianxinfu (share swap). CBPO has 12% share in the blood plasma market in China and this industry is an oligopoly growing at GDP + rates.
Key highlights:
1. Super cheap: Note that CBPO listed in US has mkt cap of US3.7B. So, company would have US620M just from this stake and this is much higher than PWM's market cap of US204M. Now company has US
68M worth of debt so even if we say PWM's OPCO is worth 0, we get intrinsic mkt cap of US552M (=620-68). Suggest at least 2x upside from here. 2. Company (OPCO) has been making infusion sets but now expanding towards insulin needle and insulin pen businesses which are high marging businesses. Company claims to have much cheaper product than peers while obtaining high margins. Big capex was already spent which lowered ROIC for the moment but will rise once production is ramped.
3. Stock buyback & insider purchase during 2018~19 at a much higher price
Risk is that there may be another bid to acquire more shares of CBPO which means no hurries to divest CBPO shares at the moment. CBPO is co-invested with couple of prominent PEs including Hillhouse. RE-listing to HK stock exchange could be on the cards (e.g. 3S BIO) but not sure.
Giao dịch đang hoạt động
I think the technicals support further upside to HKD1.24. Fundamentals are super strong as it's key subsidiary has got a privatization offer at US$120 and this value is more than 3x the current PW Medtech's market cap!!!!!
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