PW MEDTECH - EXPECT STOCK TO DOUBLE FROM HERE!!!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. wHAT IS SUPER INTERESTING IS THAT THE COMPANY OWNS 14% OF A US LISTED COMPANY CALLED CBPO AND THIS ALONE IS 3X THE CURRENT PW MEDTECH'S MARKET CAP!!!.
CBPO is THE LEADING 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. COMPANY IS ALSO A HUGE BENEFICIARY OF THE RECENT CORONA OUTBREAK AS PATIENTS NEED PLASMA PRODUCTS!
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 US$3.7B. So, company would have US$620M just from this stake and this is much higher than PWM's market cap of US$204M. 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 US$552M (=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.
IN TERMS OF TECHNICALS, THE COMPANY IS AT THE BOTTOM OF RSI BAND.
RECENTLY More BUY signals! CBPO 3Q results were mindblowing!: Company's key subsidiary CBPO has reported blockbuster 3Q results: Revenue and Operating earnings went up 14% YoY and 85% YoY, respectively. This will be reported on PW Medtech's Net profit on next earning season! On annual basis, this is around US$37m annualized NP for PW Medtech. Company also made some sales of CBPO shares with total proceeds at US$101mn so it's net cash would be US$31M. Plus the company itself makes around US$6mn in annual OP. So, let's just say we are only going to count CBPO value (14% stake in listed CBPO stock) & US$31m in cash and giving 0 value to the parentco company.
CBPO's market cap is US$4.4B and 13.9% of this equals $642m. This added with cash is US$673m.Let's say we give around 30% discount on this value which is US$436M. This is still 70% higher than current market price!!! Continue buying!
