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Hong Kong Securities Regulatory Commission warns that the equity of PAK TAK INT'L (02668) is highly concentrated! It has already plummeted by 66% this month.

On September 16, PAK TAK INT'L (02668) announced that the Hong Kong Securities and Futures Commission recently inquired about the company's equity distribution. The inquiry results showed that on September 4, 2024, 25 shareholders collectively held approximately 3.4825 billion shares of the company, equivalent to 74.41% of the company's issued share capital. Including the 980 million shares (20.94% of the issued share capital) held by a major shareholder of the company, the total equity amounted to 95.35% of the issued share capital. Therefore, the company only had about 217.5 million shares (4.65% of the issued share capital) held by other shareholders. It is worth noting that since reaching a new high in recent years on August 30, PAK TAK INT'L's share price has been continuously declining, with a cumulative drop of 66% as of the close on September 16. The announcement stated that the closing price of the company's shares rose by 1,941.7% from 0.048 Hong Kong dollars on December 1, 2023, to 0.980 Hong Kong dollars on September 4, 2024. After the closing on December 1, 2023, the company announced the completion of a placement, selling a total of 780 million new shares at a price of 0.019 Hong Kong dollars per share to at least six underwriters. After the close on August 29, 2024, the company announced its interim results; for the first half of 2024, the company had a attributable loss of 36.8 million Hong Kong dollars from equity shareholders, compared to a loss of 74.1 million Hong Kong dollars in the same period in 2023. On September 13, 2024, the company's share price closed at 0.485 Hong Kong dollars, an increase of 910.4% from the closing price of 0.048 Hong Kong dollars on December 1, 2023. It is reported that PAK TAK INT'L is mainly engaged in the production and distribution of men's, women's, and children's knitwear for export to the Americas and Europe. The company's subsidiaries include IDT INT'L Holdings Limited and Pacific Trends Limited. Through its subsidiaries, the company also provides administrative services. The announcement pointed out that due to the high concentration of equity among a small number of shareholders, even a small amount of shares being traded could lead to significant fluctuations in the company's share price. Shareholders and prospective investors are advised to exercise caution when buying or selling the company's shares.
16/09/2024

LONGFOR GROUP (00960) has received consecutive increases in holdings from major shareholders and two directors, with a cumulative increase of nearly 5% in the past two days.

Recently, LONGFOR GROUP (00960) has successively received increase in holdings from major shareholders, chairman, and independent non-executive directors, with a total amount exceeding 25 million Hong Kong dollars. According to informed sources, on September 11, LONGFOR GROUP received an increase in holdings of 3 million shares from major shareholder and founder Wu Yajun, with a total amount of approximately 22.94 million Hong Kong dollars. According to the latest equity disclosure information from the Hong Kong Stock Exchange, on the same day, LONGFOR GROUP Chairman and CEO Chen Xu Ping increased his holdings by 200,000 shares, involving approximately 1.51 million Hong Kong dollars; on September 10, independent non-executive director Chen Zhi'an also increased his holdings by 100,000 shares, totaling 799,000 Hong Kong dollars. As of the closing on September 13, LONGFOR GROUP closed at 8.02 Hong Kong dollars, with a cumulative increase of 4.56% in the two trading days following the increase in holdings by the major shareholders and chairman. Information shows that LONGFOR GROUP is a leading company in the domestic real estate industry, with its main business covering development, operations, and services. It is considered one of the benchmarks for high-quality development in the domestic real estate industry. On August 23, LONGFOR GROUP released its mid-term performance data for 2024. According to the disclosure, in the first half of this year, LONGFOR GROUP achieved operating income of 46.86 billion yuan, achieving a core net profit of 4.75 billion yuan. Among them, the revenue from operations and services was 13.10 billion yuan, a year-on-year increase of 7.6%, and contributed to over 80% of the core net profit of the entire group. During the performance briefing, the Long For management stated that in the future, Longfor will achieve two transformations. The first is the transformation of the debt structure, using positive operating cash flow to reduce interest-bearing debt and using long-term operational property loans to repay short-term credit financing. These two fund loops will lower Longfor's debt level. The second is the transformation of income and profit, with operating income accounting for nearly 30% and profit accounting for over 80% in the first half of the year. It is expected that by the end of 2028, the proportion of operating income will exceed half, completing the transition of the business income structure from old to new dynamics. In response to this, HSBC stated that Longfor will reposition itself as a landlord, obtaining stable and continuously growing recurring income from investment property portfolios. This strategic transformation is unique to Longfor, and the new business model is beneficial for Longfor's long-term development, as its unique asset reserves will receive scarcity premiums. Recently, several securities firms have also held similar views and have given LONGFOR GROUP "buy" or "outperform market" ratings. Among them, Haitong stated that it is expected that LONGFOR GROUP's earnings per share for 2024 will be approximately 1.69 yuan, giving the company a valuation of 6-7 times earnings per share for 2024, corresponding to a reasonable value range of 11.00-12.84 Hong Kong dollars per share.
16/09/2024

Archosaur Games (09990) releases another hit game "Dragon Raja: Cassell's Door", dominating the free charts for three days and entering the top ten best-selling charts.

The new card RPG game "Dragon Clan: The Gate of Cassel" by ARCHOSAUR GAMES has sparked a new trend in the domestic game market with the unique charm of the Dragon Clan IP and innovative game design since its public beta on September 12th. In just three days, this game not only dominated the iOS free game charts, but also broke into the top ten of the iOS game bestseller chart today, becoming a dark horse in the card RPG market. The success of "Dragon Clan: The Gate of Cassel" is attributed to its strong IP support and meticulous game production. "Dragon Clan" as a classic IP spanning over a decade, has a huge fan base and rich cultural heritage. ARCHOSAUR GAMES obtained dual legitimate licenses for the "Dragon Clan" novel and animation this time, undoubtedly deepening the value of the IP and further amplifying the brand influence. In terms of game design, "Dragon Clan: The Gate of Cassel" adopts classic turn-based combat modes and combines a home development system, providing players with rich character interactions and battle strategies. The bond system between characters and the introduction of alchemical weapons add variability and strategy to the battles. Additionally, the game strives to faithfully portray the original work in character development and story presentation, allowing players to experience the classic story of "Dragon Clan" while playing the game. The design of character acquisition and development in "Dragon Clan: The Gate of Cassel" fully considers the players' gaming experience and satisfaction. The first day's 130 draws, and the first week's 400 draws, as well as the design of the wish system, make it easier for players to obtain their desired characters and enjoy the fun of collection and development. ARCHOSAUR GAMES' technical advantages are fully reflected in "Dragon Clan: The Gate of Cassel". The game is developed using the Unreal Engine 4, achieving industry-leading levels in both character dynamics and visual effects in combat. The innovation in storytelling and character development also brings players a completely new gaming experience. ARCHOSAUR GAMES' top-tier product capabilities have been recognized by players. "Dragon Clan: The Gate of Cassel" with its unique charm and innovative game design has brought players a fresh gaming experience, earning praise on various social and gaming platforms. Since the public beta, the soul character of the Dragon Clan IP, Hui Liyi, has resonated strongly with the player community, with the hashtag #HuiLiyi cos# reaching the top of the TikTok hot list, with 27 million views, and the public beta theme song being played nearly 3 million times in 3 days, ranking first in the music section and sixth overall. With the opening of the timed Hui Liyi activity on September 15th, players' enthusiasm for the game has been further activated, and various "lucky pulls" screenshots can be seen everywhere in the official comments section. The success of "Dragon Clan: The Gate of Cassel" is not only a successful attempt by ARCHOSAUR GAMES in the card RPG category, but also another victory for its global research and operation integration strategy. With the game's continued popularity, ARCHOSAUR GAMES' competitiveness in the gaming market will be further enhanced, and its future product line is even more anticipated. Another 3D new game "Walking in the Wind" is also scheduled to be public tested this year. This product, built with Unreal Engine 4 and using a placement RPG gameplay, features a beautiful fantasy cultivation world setting and rich gameplay design, receiving positive reviews during the testing phase. It is reported that ARCHOSAUR GAMES is continuously exploring more possibilities with the Dragon Clan IP. The MMORPG+ game "Project Code: Odin" based on the "Dragon Clan" series novels and created with Unreal Engine 5 is currently in orderly development. It is believed that ARCHOSAUR GAMES will continue to create more surprises in the gaming market and bring more high-quality game works to players. The success of "Dragon Clan: The Gate of Cassel" undoubtedly adds more confidence and motivation to the future development of ARCHOSAUR GAMES.
15/09/2024

Behind the six consecutive drops in the stock price of KANGJI MEDICAL (09997) is the fact that low-value consumables cannot support the company's ambition.

In September, KANGJI MEDICAL (09997) experienced six consecutive drops in the secondary market. The company's stock price dropped from the closing price of 5.79 Hong Kong dollars on August 30 to a low of 4.91 Hong Kong dollars on September 11 after six days of consecutive declines, giving back all the gains since mid-February of this year. That evening, KANGJI MEDICAL urgently issued a clarification announcement stating that "on the date of this announcement, TPG maintains its shareholding unchanged in the company." It was only after the company's announcement that many investors realized the sudden drop in the company's stock price. The reason for this market sentiment fluctuation at KANGJI MEDICAL this time is that there were reports in the market that TPG, as the major shareholder of KANGJI MEDICAL, had "sold" all of its KANGJI MEDICAL shares as can be seen on the Hong Kong Stock Exchange's official website. It is understood that TPG is currently the largest institutional shareholder of KANGJI MEDICAL, with a stake of 17.86%. If TPG chooses to completely divest its stake in the company, it will obviously have a significant negative impact on KANGJI MEDICAL's stock price and market value. However, according to KANGJI MEDICAL's clarification announcement, this is an internal compliance disclosure following an internal adjustment at TPG and does not involve any trading of TPG's shares in KANGJI MEDICAL. After the clarification announcement on September 11, KANGJI MEDICAL's stock price rebounded significantly in the following two trading days, with gains of 4.39% and 2.49%, respectively, and the stock price returned to around 5.5 Hong Kong dollars. However, even ignoring this "small episode," since the release of the 2024 interim report on August 20, KANGJI MEDICAL's stock price has not shown any improvement, in stark contrast to the nearly 15% increase in stock price after the release of the 2023 annual report in the first half of the year. This may be due to investors' changing views on the market growth space in the low-value consumables sector and the valuation growth curve of companies in the industry. Accelerating the layout and investment in high-value consumables On August 20, KANGJI MEDICAL disclosed its 2024 interim report. The financial report showed that KANGJI MEDICAL achieved revenue of 458 million yuan in the current period, a year-on-year increase of 13.6%; gross profit of approximately 363 million yuan, a year-on-year increase of 12.9%; and net profit attributable to owners of the parent company of approximately 286 million yuan, a year-on-year increase of 11.9%. If we take the company management's statement at the 2023 annual report performance meeting that "the company's future three-year revenue growth is expected to be 20-25%" as a benchmark, KANGJI MEDICAL's revenue growth in the first half of this year can only be described as flat. In addition, the difference...Towards high-end, towards overseas.As mentioned above, as a domestic leader in the MISIA medical device industry, KANGJI MEDICAL can fully rely on its own market channel construction and first-mover advantage to establish a moat. However, under the logic of centralized procurement, from the perspective of the company, the continuous internal competition will only further compress profit margins, and the overall market value-added space will also be greatly reduced. Therefore, while stabilizing the foundation of low-value consumables, KANGJI MEDICAL urgently needs to seek the next incremental market. There are two directions facing KANGJI MEDICAL now. One is to accelerate the transformation of products from low-value consumables to high-value consumables with higher innovation capabilities, and the other is to break the internal competition in the domestic market and export products to overseas markets. These two directions are not mutually exclusive, but require KANGJI MEDICAL to make efforts simultaneously. Investors can clearly see from KANGJI MEDICAL's recent financial reports that the company is accelerating its development towards high-value consumables such as ultrasonic knives, staplers, and endoscopes, but obstacles also come along with it. Firstly, its financial structure, relying on low-value consumable products to build a "low research and development, low capital expenditure" and high gross and net profit structure, is somewhat impacted. Compared horizontally with enterprises specializing in ligation clips and hemostatic clips in China, the gross profit margin is generally between 70-85% and the net profit margin is between 25-40%. As one of the top players in the industry, KANGJI MEDICAL has excellent financial data which has always attracted investors' attention in the secondary market, but entering the high-value consumables market is undoubtedly "stepping out of the comfort zone". As mentioned earlier, products such as ultrasonic knives and endoscopes are constrained by labor and production process costs, resulting in naturally lower gross profit margins. When the company accelerates its layout and promotion, it will continue to lower its comprehensive gross profit margin. However, transitioning to high value consumables also has its pros and cons. For example, at the end of 2020, KANGJI MEDICAL obtained the domestic registration certificate for staplers, which brought in 12 million yuan of incremental market for KANGJI MEDICAL by 2023. According to the 2023 annual report, by the end of 2023, KANGJI MEDICAL had a total of 92 products registered with the China National Medical Products Administration (NMPA), and the company's technological barriers were steadily established. Compared to the domestic market, the overseas market seems to be more attractive to KANGJI MEDICAL. According to the previously disclosed 2023 financial report, KANGJI MEDICAL's investment in the overseas market is mainly focused on two aspects: increasing overseas market registrations and increasing the output of its own brands. In 2023, KANGJI MEDICAL had 22 products registered in overseas markets such as Central and South America and Southeast Asia, while increasing registrations, KANGJI MEDICAL also gradually increased the output of its own brands. In the past, Chinese minimally invasive surgical product companies mainly focused on OEM for going abroad, with fewer self-owned brands, and Chinese brands did not establish brand recognition in the global market. Although KANGJI MEDICAL's previous layout of the overseas market was also primarily focused on OEM, it is currently adjusting its layout step by step, with a significant 67.3% year-on-year increase in revenue from overseas distributors in 2023, far exceeding revenue from ODM customers. According to the latest financial report, in the first half of this year, KANGJI MEDICAL initiated the optimization of its overseas customer structure, increasing the number of countries and regions covered by its products to 69, an increase of 22 compared to the same period last year. The company obtained 141 overseas customers, an increase of 43 compared to the same period last year. During the reporting period, the company obtained 11 new overseas registration certificates, some of which were registered through OEM customers and distributors. However, KANGJI MEDICAL's steps to "go global" still seem somewhat conservative. Compared with competitor Hangzhou AGS Medtech, whose overseas revenue reached 138 million yuan in the first half of 2024, a year-on-year increase of 35.3%, accounting for 52% of total revenue. In contrast, KANGJI MEDICAL's target is for overseas revenue to account for 15% in the next 3 years. Perhaps compared to going global, KANGJI MEDICAL prefers to stabilize its domestic foundation.
15/09/2024

The rural areas surrounding the city, the dominant tumor hospital HYGEIA HEALTH (06078) is also deeply trapped in the dilemma of expansion.

Four years ago, HYGEIA HEALTH (06078) was listed on the Hong Kong Stock Exchange. Taking advantage of the trend in the medical industry and the scarcity of tumor hospitals, HYGEIA's stock price continued to rise, reaching a market capitalization of nearly HK$70 billion at its peak, enjoying a moment of great success. However, this good time did not last, as after reaching a high, HYGEIA's stock price declined continuously, and recently it has fallen below its IPO price, with its market value evaporating by over 80% within two years. Despite the continuous decline in its stock price, HYGEIA's performance in recent years has been quite impressive. Data shows that in the past seven years, HYGEIA's revenue growth CAGR reached 37.8%, and the adjusted net profit CAGR reached an impressive 56.2% over the same period. The rapid growth in performance over the years was mainly due to HYGEIA's focus on market trends and its ability to integrate resources. Riding the industry trend and targeting third-tier and lower-tier cities to become the dominant force in tumor hospitals It is understood that tumor hospitals, as a type of specialized hospital, mainly focus on the prevention and treatment of tumor diseases. Specialized hospitals are different from general hospitals, as they are built around the service characteristics of a specific department based on the classification of clinical departments in general hospitals, characterized by small scale, specialized functions, and precise techniques. Looking at the development history, China established tumor specialized hospitals as early as the 1950s, making significant progress in the specialized treatment of tumors. With the professionalization of tumor treatment, China's level of tumor treatment has gradually improved, presenting a good development opportunity for tumor hospitals. From an industry chain perspective, the upstream of tumor hospitals includes industries such as medical equipment and pharmaceuticals. While hospitals have a huge demand for medical and consumable supplies, equipment, drugs, office supplies, etc., the market still has an oversupply. Hospitals have bargaining power with various manufacturers and suppliers in terms of profit margins, product allocation, and additional technical support. Therefore, when dealing with upstream suppliers, tumor specialized hospitals have strong bargaining power. The downstream mainly refers to tumor patients. Looking at the outpatient visits to tumor hospitals in China, data shows that in 2022, there were about 26.6032 million visits, with approximately 4.0404 million admissions and 4.0312 million discharges. With the increasing trend of aging, the number of cancer patients in China is increasing each year, resulting in a growing demand for tumor hospitals. According to Frost & Sullivan's data, it is estimated that by 2025, the number of cancer patients in China will reach 5.11 million, with the majority of patients coming from third-tier cities. The demand for tumor medical services in China is increasing year by year, and the total market revenue is continuously rising, reaching a market size of 373.7 billion RMB in 2019, and is expected to continue to expand in the future. Due to the higher number of patients, third-tier cities have become the regions with the highest demand for tumor medical services. However, their medical resources are relatively scarce, and most of the demand is difficult to meet. This area has a vast market space for tumor medical services waiting to be developed. As for the current situation of tumor hospitals in China, statistics show that as of 2022, the number of tumor hospitals in China is approximately 162, with about 82 public tumor hospitals and 80 non-public tumor hospitals. In recent years, the development of the domestic private medical market has been driven by policies, accelerating the construction of private tumor hospitals. In 2022, the proportion of non-public tumor hospitals further increased to 49.38%. In terms of revenue, China's total revenue in tumor hospitals has continued to grow. Data shows that China's tumor hospital revenue increased from 18.9 billion yuan in 2016 to 49.9 billion yuan in 2021, with a compound annual growth rate of 21.4%. It is expected to reach 106.7 billion yuan by 2025, with a compound annual growth rate of 20.9% from 2021 to 2025. Since acquiring 95% of GammaStar Technology (manufacturer and seller of radiotherapy equipment) in 2009 and entering the tumor medical industry, HYGEIA HEALTH has focused on third-tier cities or even more underdeveloped counties and cities. The expansion route of "rural surrounding cities" has enabled HYGEIA HEALTH to achieve rapid expansion. As of the first half of 2024, HYGEIA manages or operates 16 hospitals with tumor departments as their core, including 4 tertiary hospitals, 12 secondary hospitals, and 2 tertiary scale hospitals under construction, covering 13 cities in 8 provinces in China, with the coverage gradually improving. Furthermore, it is worth noting that, apart from its fast expansion speed, HYGEIA HEALTH's integration speed and operational efficiency in hospitals are also significantly higher than the industry average. This is mainly due to the centralized management structure, the "Dual-Hospital-Chief System," and the micro-module organizational management structure established by HYGEIA, which standardizes the management system, enables the quick enhancement of newly established hospitals, successful integration of acquired hospitals, and rapid growth within a short period. According to Frost & Sullivan's data, it usually takes 36 to 48 months for a comprehensive hospital with an area of 25,000 to 80,000 square meters to start operation after construction, and it generally takes about 3 years for it to become profitable. In comparison, HYGEIA's self-built hospitals can start operation as early as 17 months after construction begins and can be profitable within 3 to 9 months after opening, far exceeding the industry average. Based on these advantages, HYGEIA HEALTH has established a dominant position in the domestic tumor medical service industry. Achieving stable performance growth through mergers and acquisitions, but accumulating a large amount of goodwill has become a hidden danger However, after large-scale expansion, HYGEIA, like many private medical institutions, is also facing the challenges of expansion. In its just-released interim report, in the first half of 2024, HYGEIA achieved operating income of 2.38 billion yuan, a year-on-year increase of 37.6%; gross profit of 770 million yuan, a year-on-year increase of 32.5%; EBITDA of 650 million yuan, a year-on-year increase of 28.7%; and adjusted net profit of 400 million yuan, a year-on-year increase of 15.5%. Specifically, in the first half of the year, HYGEIA's hospitals performed 46,095 surgeries, with surgical income increasing by 38.6% year-on-year. As a result, HYGEIA's hospital business income in the first half of the year was 2.31 billion yuan, accounting for 96.9%, with a year-on-year increase of 37.2%.Revenue from outpatient services increased by 49.63% year-on-year to 8.1 billion yuan, while revenue from inpatient services increased by 31.3% to 14.9 billion yuan. In terms of disciplines, revenue from oncology services increased by 31% year-on-year, accounting for 43.9% of total revenue. Obviously, the year-on-year increase in the number of patients and revenue represents an improvement in the hospital's operational and expansion capabilities.In terms of expansion strategy, Hygeia mainly adopts acquisition with self-build as a supplement. In terms of the progress of hospital construction, according to the company's financial report, the company's fifth self-built hospital, Dezhou Hygeia, passed the acceptance of a tertiary hospital in March 2024, and officially put into operation in July 2024, with plans to set up 1000 beds. The construction projects of Wuxi and Changshu Hygeia are progressing in an orderly manner, both of which are planned to be tertiary hospitals with 800-1000 beds and 800-1200 beds respectively. In addition, several expansion projects such as the third phase of Chang'an Hospital, the second phase of Hezhou Guangji Hospital, the second phase of Suzhou Yongding Hospital, and the second phase of Kaiyuan Jiehua Hospital are progressing in an orderly manner. After all the self-built projects are put into operation, the total number of beds will exceed 16,000. The integration of merger projects is progressing orderly, with Chang'an Hospital introducing 7 senior title discipline leaders and 22 senior title experts, and Yixing Hygeia Hospital continuously improving its discipline development, successfully establishing a municipal "Chest Pain Treatment Unit". However, this expansion strategy has led to a significant feature in its financial report: a large amount of goodwill. The financial report shows that as of June 30, 2024, Hygeia's intangible assets amounted to 3.944 billion yuan, accounting for 36.74% of total assets, becoming the second largest asset after fixed assets. Many private hospitals have fallen into a dilemma due to excessive goodwill. For example, Yihua Health (*ST Yikang), which has been delisted from the capital market. Starting from 2014, Yihua Real Estate successively incorporated hospital operations, medical equipment, and elderly care businesses into the listed system, with a total investment exceeding 3 billion yuan. However, Yihua Health is obviously inexperienced in the field of medical services, and the development of hospitals has stagnated. After years of accumulation, Yihua had to make large goodwill impairment, and the profit for that year was even worse. Such dilemmas are not uncommon in the wave of privately-run hospitals. Aier Eye Hospital Group incurred over 1 billion yuan of goodwill impairment from 2017 to 2022, while still having 6.533 billion yuan of goodwill on the books (2023 annual report). INKON Life Technology made a goodwill impairment provision of 1.195 billion yuan for Sichuan Friendship Hospital and Maxwell Medical College, which was the direct cause of losses in the past three years. Therefore, high goodwill is also a time bomb for Hygeia. In addition, there is a scarce resource that cannot be solved by penetrating the market, which is physician resources and is currently one of the biggest problems facing private hospitals in China. The National Health Commission has issued the "14th Five-Year Plan for the Development of Health and Health Talents." The plan proposes that by 2025, the national health and health personnel team will be further expanded, with a total of 16 million personnel. The plan clearly states that the focus in the next five years will be on scarce specialties, clinical key specialties, and will focus on strengthening the training and development of clinical specialties in critical care, oncology, cardiovascular and cerebrovascular diseases. Taking radiotherapy as an example, the National Health Commission commissioned the China Medical Equipment Association to conduct a nationwide survey on the radiotherapy specialty. The results show that there is a gap of nearly 11,000 radiotherapy specialists, including over 4,800 specialized radiotherapists, over 2,000 radiotherapy physicists, and nearly 4,000 therapists. The existence of these gaps is due to the fact that the training speed of radiotherapy talents is not keeping up with the growth in clinical demand, and is also affected by factors such as unclear career advancement paths and low salaries. Radiotherapy physicists face the embarrassment of "no promotion possible" in public hospitals, and their corresponding salary and benefits are directly affected, which hinders the development of radiotherapy talent. At the same time, the shortage of radiotherapy talent is considered a key issue restricting the development of the radiotherapy industry in China. As of June 30, 2024, Hygeia has a total of 7,587 medical professionals, with an increase of 104 people in the first half of 2024 compared to the same period in 2023. Among them, there are 1,220 senior professional and technical personnel, including 74 experts who enjoy special government allowances from the State Council and chief and deputy chief of various expert societies. The company continues to strengthen internal medical training, with 422 medical professionals promoted to higher-level positions as of June 30, 2024. Currently, Hygeia's expansion has not been affected by the shortage of doctors, but in the long run, Hygeia's expansion will be limited by the availability of physician resources. In addition, in the first half of the year, Hygeia's sales costs increased by 36.7% to 1.625 billion yuan, with employee welfare expenses reaching 760 million yuan, an increase of approximately 29.03% year-on-year, accounting for 46.77% of total sales costs. It is evident that in order to maintain a stable retention rate of core doctors, the growth rate of doctors' salaries has exceeded the revenue growth rate for the current period. As private hospitals are the most attractive factor for doctors compared to public hospitals. Therefore, in the future, as Hygeia continues to expand, the cost pressure of doctor salaries may further manifest, posing a stumbling block to the valuation growth process of Hygeia HEALTH. In addition, according to Hygeia's financial report, the proportion of bad debts in medical insurance to income was 1% in the first half of 2023, 2.4% for the whole year of 2023, and 2.7% in the first half of 2024. The increasing proportion of bad debts in medical insurance indicates that although Hygeia's drug business accounts for a small proportion, it is still significantly affected by the DRGs policy.
15/09/2024

Shanghai Fosun Pharmaceutical (600196.SH) further deepens its presence in the field of cell therapy and upgrades its cooperation with Kite Pharma.

On September 13, 2024, Shanghai Fosun Pharmaceutical (600196.SH, 02196) announced that its holding subsidiary, Shanghai Fosun Pharmaceutical Industry, intends to invest $27 million in cash to acquire 50% of the shares of Kite Pharma held by Kite Pharma. After the completion of this transfer, Shanghai Fosun Pharmaceutical will hold 100% of the shares of Kite Pharma and plans to inject $10 million in cash or an equivalent amount in RMB as a single shareholder to increase the capital of Kite Pharma. On the same day as the signing of the "Equity Transfer Agreement", Kite Pharma and Kite Pharma revisited the original licensing agreement and reached a comprehensive revision and restatement of the "Revised and Restated License Agreement". Under this agreement, Kite Pharma has been granted exclusive rights by Kite Pharma to develop, produce, and commercialize Yescarta and Brexu-Cel (Kite Pharma's research project FKC889) in the region (mainland China, Hong Kong, and Macau) and field (cancer treatment field). The announcement shows that Kite Pharma should pay Kite Pharma a total of $10 million in milestone payments for this license, and depending on the achievement of annual net sales of the licensed products, Kite Pharma should pay Kite Pharma up to $25 million in sales milestones. Kite Pharma should pay Kite Pharma a royalty fee ranging from 7% to 13% of the annual net sales of all licensed products in the licensed region. In addition, Shanghai Fosun Pharmaceutical's wholly-owned subsidiary, Kite Pharma, intends to rename to Fosun Care and will serve as the core platform for Shanghai Fosun Pharmaceutical's cell therapy technology, focusing on oncology immunotherapy and driving CAR-T cell therapy products to benefit more patients and meet unmet clinical needs. In the future, Shanghai Fosun Pharmaceutical and Kite Pharma will continue to maintain a long-term strategic partnership through a license cooperation model. Wu Yifang, Chairman of Shanghai Fosun Pharmaceutical, said, "Since establishing a strategic partnership with Kite Pharma in 2017, the two parties have closely collaborated to promote the rapid development of CAR-T technology and cell therapy product Yescarta in China. Shanghai Fosun Pharmaceutical is optimistic about the development prospects of cell therapy and will continue to advance the construction of a globally leading technology platform. In the future, we will further expand the application of cell therapy in the fields of oncology and autoimmunity, focus on unmet clinical needs, fulfill our promises to patients, and bring the benefits of technological innovation to more patients."
13/09/2024

PALASINO (02536): After 7 transactions, who will be the first to lift the ban?

After more than 5 months of listing, the stock price of PALASINO (02536), which is "burning high," is about to face a "lifting ban exam". It is noted that the first six-month lock-up period after "Europe's first gaming stock" PALASINO landed on the Hong Kong stock market will end on September 25. According to the company's previous final offer price and allocation announcement, the shares held by the initial public offering investors and cornerstone investors will be unlocked at that time, with a total unlock proportion exceeding 12% of the company's total issued share capital. For newly listed stocks, the lifting of the lock-up period usually serves as a pressure test on the stock price, as important shareholders from the angel round to the international placement before listing will evaluate whether to exit after the lifting, especially for targets whose stock prices have been rising steadily after listing, the selling pressure after the lifting should not be underestimated. Taking PALASINO as an example, although the company's first annual report after listing showed poor performance, with net profit shrinking by 80% to 9.492 million Hong Kong dollars in the 2024 fiscal year with only a slight increase in revenue, the company's stock price still maintained a strong upward trend overall. In the first half of the year, PALASINO's stock price soared to 7.19 Hong Kong dollars at one point, despite a sharp pullback in early August, the stock price is still holding at a relatively high level of 4.25 Hong Kong dollars, more than a 60% increase from the issue price of 2.6 Hong Kong dollars. A huge unlock will soon test the stock price As a company that combines gaming and leisure, PALASINO is spun off from FE CONSORT INTL (00035), and its business covers gaming operations in the Czech Republic and hotel operations in Germany and Austria. According to public information, after listing, FE CONSORT INTL holds 73.21% of PALASINO through Ample Bonus; Dateplum Harvest Limited, an initial public offering investor, holds 8.93%. In addition, PALASINO also introduced a cornerstone investor, Ups International Technology Co., Ltd., a Taiwanese provider of slot machines and social games, which subscribed to 70 million Hong Kong dollars of shares in the offering, accounting for 3.4% of the total share capital after the IPO. As mentioned earlier, the stock price trend of PALASINO after landing on the Hong Kong stock market can be described as strong, with the stock price even touching 7.19 Hong Kong dollars at one point two months after listing, nearly 1.8 times the issue price. Considering the twists and turns in the Hong Kong stock market this year, aside from active capital speculation, the rising trend of PALASINO's stock price may also be related to the company's scarcity. It is understood that the vast majority of gaming stocks in the Hong Kong stock market mainly operate in Macau or Southeast Asia. PALASINO is currently the only comprehensive European gaming and entertainment company owned and controlled by a Hong Kong-listed company, which undoubtedly attracts attention from Hong Kong's local market funds. Moreover, PALASINO has also obtained an online gaming license from the Malta Gaming Authority, which may also be considered a plus for the company's stock supporters. However, it should be noted that after peaking at the end of May, PALASINO's stock price showed signs of decline, and even in early last month, the company's stock price plummeted by 30% in just one week, breaking the trend of price increase. As we approach mid-September, there are only a dozen days left until the important shareholders of PALASINO are unlocked. With a flood of chips becoming available, the substantial unrealized gains of important shareholders may turn into selling pressure on the market at any time. According to the allocation announcement released by PALASINO, the 8.93% shareholding held by Dateplum Harvest Limited, an initial public offering investor, and the 3.4% shareholding held by cornerstone investor Ups International Technology Co., Ltd., will both be unlocked at the end of this month. If these two shareholders choose to "close the bag for safety," it will undoubtedly have a significant impact on the stock price. From a liquidity perspective, the average daily turnover of PALASINO has been around 1 million Hong Kong dollars since September, with only one day exceeding 2 million Hong Kong dollars on September 10, and the total turnover was only 5.5857 million Hong Kong dollars on that day, making it difficult to absorb a concentrated selling pressure of hundreds of millions of Hong Kong dollars. In addition, the lock-up period for the controlling shareholders of PALASINO, who hold over 70% of the shares, will end on September 25 and March 25, 2025, respectively, which means that the initial unlockable shares held by the major shareholders can be listed for trading as early as September 26. With a vast amount of unlockable shares soon to be released, it is probably time to test the true value of PALASINO. Sudden increase in profit pressure and doubts about growth For a listed company, performance is the best touchstone to evaluate its investment value. Although PALASINO is a scarce European gaming concept stock in the Hong Kong stock market, it is regrettable that the current performance of the company is hardly enticing for value investors focusing on fundamentals. In the 2024 financial year, PALASINO's revenue increased by 7% to 564 million Hong Kong dollars, while net profit shrank by nearly 80% to 9.492 million Hong Kong dollars. The significant decline in profit is related to the expenses incurred by PALASINO in its rush to go public during the period. Data shows that the expenses incurred by PALASINO for listing in the 24 fiscal year were 23.537 million Hong Kong dollars, but even after excluding this expense, the company's net profit still showed a negative growth on a year-on-year basis. Looking at the revenue breakdown, PALASINO's revenue comes from gaming operations and hotel operations. The gaming business mainly comes from entertainment venues in the Czech Republic, contributing 402 million Hong Kong dollars in revenue during the period, with a growth rate of only 3%. The lackluster growth of the gaming business is not surprising, as even in Europe, competition among casino operators is fierce. According to information from Zhishi Consulting, as of the end of 2022, the Czech Republic had 472 physical entertainment venues and 362Casino hall. In 2022, according to the total number of slot machines in the Czech Republic, the market share of the three major casino operators is 35.4%, while PALASINO ranks ninth among casino operators, with a market share of only 2.5%; according to total gambling revenue, PALASINO's market share in the physical slot machine industry in the Czech Republic is 5.3%.Looking at the hotel business again, in the 24th fiscal year, the revenue of PALASINO's business was HKD 162 million, an increase of 17% year-on-year. It is reported that this was due to the increase in hotel occupancy rates and average daily revenue. It is worth mentioning that although PALASINO's casino is located in the Czech Republic, over 95% of the players at the company's casino come from neighboring countries such as Austria and Germany, with only a very small portion of revenue coming from local Czech residents. In other words, the company's financial prospects are closely related to the overall economic, social, and market conditions in Austria and Germany. Although in recent years PALASINO has been actively nurturing new growth points, such as obtaining an online gambling license in Malta, whether these new businesses can smoothly take over remains to be seen. The confusion in growth expectations is obviously not a good thing for PALASINO, whose stock price has already experienced a round of speculation after going public. Now, facing another challenge of lifting restrictions, it seems uncertain whether PALASINO's stock price can hold stable under multiple challenges. This situation certainly raises a big question mark.
13/09/2024

450 billion beauty giant L'OCCITANE (00973) officially delists, with increased revenue but no increase in profits in the 2024 fiscal year.

On September 13th, French beauty brand L'OCCITANE (00973) announced its official delisting from the Hong Kong Stock Exchange, ending its 14-year listing journey. The final financial report released before delisting showed that L'OCCITANE's net sales increased in the 2024 fiscal year, but "increased revenue did not increase profits." On the last trading day before delisting, L'OCCITANE closed at HK$33.7, with a total market value of approximately HK$49.7 billion, equivalent to approximately RMB 45 billion. In a previous statement, L'OCCITANE stated that delisting would provide the group with flexibility to make long-term business decisions. Chairman of the group, Reinold Geiger, proposed to acquire the remaining shares of L'OCCITANE at a price of HK$34 per share, with a transaction valuation of approximately 6 billion euros (approximately RMB 47.2 billion). Blackstone and Goldman Sachs Alternative Investments provided a commitment of 1.551 billion euros (approximately RMB 12.2 billion) in funding support for the privatization of L'OCCITANE. In 2010, the L'OCCITANE Group was listed on the main board of the Hong Kong Stock Exchange, becoming the first French company to be listed in Hong Kong. With the rise of domestic e-commerce channels, in the 2021 fiscal year, the Chinese market became L'OCCITANE's largest global market for the first time, contributing 17% of sales, and in the 2022 fiscal year, China's market share remained at 18.1% as the top market. However, in recent years, L'OCCITANE has gradually fallen from grace. Starting from the 2023 fiscal year, the Chinese market dropped to become the second largest market for the L'OCCITANE Group, with sales share decreasing from 18.4% to 14%, and further dropping to 12.9%. In contrast, the United States became L'OCCITANE's largest market, accounting for 27.2% of the group's total sales, compared to only 14.1% the year before. As early as July last year, news of L'OCCITANE's privatization circulated in the market, followed by a notice from its controlling shareholder, L'Occitane Group S.A., suggesting a potential comprehensive takeover at a price of HK$26 per share, which was soon terminated. In February this year, Blackstone Group was reported to be considering acquiring L'OCCITANE. Two months later, L'OCCITANE briefly halted trading to announce "insider information about acquiring and merging the company in accordance with acquisition and merger cost regulations," until April 29th when the company officially confirmed the privatization plan. On July 23rd this year, L'OCCITANE announced that 371 million shares had accepted the offer for privatization, with most shareholders having no objections to the privatization. Eventually, L'OCCITANE agreed to privatize, and all remaining shares will be forcibly acquired and transferred to the offeror on October 15, 2024. In terms of the acquisition price, this was a premium acquisition. Compared to the potential price of HK$26 per share last year, the final acquisition price of HK$34 per share seems "sincere and full of sincerity." Before privatization, the performance fluctuation of L'OCCITANE prompted a "trimming down." In April, L'OCCITANE sold off the sub-brand Grown Alchemist, a skincare brand that was acquired just two years ago, which had been in the Chinese market for less than a year with dismal sales. In the same month, L'OCCITANE officially changed leadership, with the new CEO Laurent Marteau taking office. Before delisting, the last financial report for the 2024 fiscal year (April 1, 2023 to March 31, 2024) was released, showing an increase in net sales for L'OCCITANE in the 2024 fiscal year, but "increased revenue did not lead to increased profits." During the reporting period, the L'OCCITANE Group achieved revenues of 2.542 billion euros (approximately RMB 20 billion), with operating profit decreasing by 2.5% compared to the 2023 fiscal year, reaching 233 million euros (approximately RMB 1.8 billion). Perhaps it was due to L'OCCITANE's declining performance that this privatization opportunity arose.
13/09/2024

The debt-to-equity ratio of ZALL SMARTCOM (02098), which has doubled its net profit, has rapidly exceeded 50%. The future outlook is far from optimistic.

Recently, several industrial e-commerce companies have successively released mid-term performance reports, showing a positive development trend in general. Among the 10 listed industrial e-commerce companies, 4 have revenue exceeding 10 billion yuan, 8 have achieved positive revenue growth, 7 have positive net profits, and 6 have positive net profit growth. Among them, ZALL SMARTCOM (02098), with a scale of over 100 billion, also achieved significant growth in performance, with revenue of approximately 68.276 billion yuan in the first half of the year, a year-on-year increase of 24.29%; the net profit attributable to equity shareholders of the company was 49.817 million yuan, an increase of 122.76% year-on-year. However, while the performance is improving, the company has significantly reduced pledged bank deposits and the asset-liability ratio has been steadily climbing, seemingly hinting at risks and concerns behind the fundamentals. By the close of September 11th, the company's stock price fell by over 6% intraday, with trading volume further shrinking, reflecting market pessimism towards ZALL SMARTCOM. It is worth noting that despite the improvement in revenue indicators in the first half of the year, the company's financial situation is difficult to be optimistic. As of June 30, 2024, the company had current liabilities of 42.346 billion yuan, non-current liabilities of 7.309 billion yuan, and current liabilities accounting for 85.3%. Among them, loans from banks and other financial institutions due within one year amounted to 5.657 billion yuan (fixed annual interest rates ranging from 3.45% to 11.75%), and other loans due within one year amounted to 2.594 billion yuan (fixed annual interest rates ranging from 4.00% to 12.00%). Industry insiders point out that the high proportion of current liabilities reflects the increasing difficulty for ZALL SMARTCOM to obtain long-term, stable, and low-cost loans from banks. The company's adjusted net debt increased by 185% to 7.187 billion yuan from 3.878 billion yuan in the same period last year, and the asset-liability ratio surged from 28.09% in the same period last year to 51.90%, mainly due to a significant decrease in pledged bank deposits. Previously, in order to alleviate financial pressure, ZALL SMARTCOM had announced at the end of 2022 that it would sell its Tianjin e-commerce mall project at a low price to recover 1 billion yuan in cash, with 95% of it used to repay various debts. The net asset value of this project was about 1.205 billion yuan, resulting in a loss of about 205 million yuan for the company. "Zuoer Group" has a huge empire, but negative news keeps coming In fact, in recent years, the "Zuoer Group" to which ZALL SMARTCOM belongs has frequently been associated with unfavorable news, and there are still many hidden worries about the security of the company's capital chain. In February 2022, the Zuoer Group was embroiled in a "wage arrears" storm when the football player Hao Junmin posted on Weibo, demanding back pay from the Wuhan Zuoer club, which was owned by Zuoer at the time. He stated, "The salary was promised to be resolved by the end of the year, then before the end of the year, and now they say after the Lunar New Year." In this public post demanding back pay, Hao Junmin also specifically mentioned Zuoer's actual controller Yan Zhi. Yan Zhi is a football enthusiast. At the end of 2011, Zuoer spent a huge amount of money to take over the Wuhan Football Team, operating for more than 11 years, with a total investment of over 3 billion yuan. However, after being publicly accused, a series of behind-the-scenes operations involving this huge investment gradually came to light. In January 2024, in a CCTV annual anti-corruption documentary, the former chairman of the Wuhan Zuoer Club, Tian Xudong (who had served as Zuoer Holdings' vice president), admitted to engaging in transactions of power and money with the former head coach of the national football team, Li Tie, at the club, with the club offering huge sums to bribe relevant personnel. Shortly after the case came to light, the Wuhan Zuoer club was disbanded. Football is just a part of the Zuoer commercial empire. Yan Zhi is adept at telling the story of an industrial ecological circle to external parties, and likes to pursue a diverse, large-scale business empire. Public information shows that the "Zuoer Group" includes 5 listed companies including ZALL SMARTCOM, China Tongshang, Lanting Jieshi, Wuhan Huazhong Numerical Control, and Hanshang Group, and is involved in various industries such as e-commerce, textiles, agriculture, aviation, finance, medicine, real estate, and sports. Among them, real estate, football, private banks, P2P, and other high-risk projects have been repeatedly exposed for various irregularities. ZALL SMARTCOM is the core enterprise of the group, and initially, real estate was one of ZALL SMARTCOM's core businesses. In addition to wholesale markets, it also ventured into the development of office buildings, large urban complexes, and residential projects. Since 2015, ZALL SMARTCOM has transitioned from a traditional real estate development company to an e-commerce enterprise, but the Zuoer Group has not completely abandoned the real estate market, instead engaging in real estate development through two companies, Zuor Culture and Tourism (now known as Huazhong Hualv Group) and Zuoer Zhicheng. However, progress in the real estate sector has not been smooth for Zuoer. For example, the Zuoer Shenyang Living Room project, which has attracted attention, has made significantly delayed progress compared to expectations, and in recent years the company has added a lot of information on persons being executed. According to statistics, since 2022, Zuoer Culture and Tourism and its subsidiaries have been executed for a total amount of 108 million yuan. Zuoer Zhicheng was also listed as a dishonest executor by the court on December 1, 2022. On the other hand, the financial sector under the "Zuoer Group" has also faced challenges. Previously, Jiashi Fund had ventured into P2P business, trying out the P2P lending platforms "Qianduoduo" and online lending information intermediaries.Platform "Jiashiliu". However, against the backdrop of increasingly stringent regulation of Internet finance, Jiashiliu announced its withdrawal from the online lending industry in June 2020. In 2019, ZALL SMARTCOM divested its financial assets and sold all the equity in ZALL Financial Services.In addition to P2P business, Zhuoer also lays out multiple business sectors through Zhongbang Bank, Zhongbang Fund, Zhongbang Gold Control, including industrial finance, wealth finance, supply chain finance, as well as investing in government public projects (PPP, characteristic towns, industrial parks) and personal life (health, culture, tourism) and more. The 2023 annual report shows that Zhongbang Bank is now in a difficult situation: its asset size has fallen out of the top three, the non-performing loan ratio has been rising for three consecutive years, its capital adequacy ratio ranks last among 18 private banks, it ranks first among private banks in terms of the amount of fines and number of penalties received for violations of laws and regulations. In addition, half of the bank's shareholders are involved in legal disputes. From a media person running advertising business, Yan Zhi has gradually become the richest man in Hubei Province, and he can be said to be an expert in playing the capital market. By holding shares with the Fullshare Group, he once single-handedly pushed ZALL SMARTCOM's market value to exceed HK$100 billion, with Fullshare's holding of ZALL SMARTCOM shares appreciating by more than HK$6.6 billion at its peak. However, with the stock price of the controlling shareholder Fengsheng Holdings being shorted and ZALL SMARTCOM's share price dropping significantly, the investment returns of both companies turned into losses, and the game of cross-shareholding gradually came to an end. Through a series of operations in the capital market in recent years, the "Zhuoer Group" has successively controlled Hanshang Group, Wuhan Huazhong Numerical Control and other listed entities, using them as pawns and tools for the next capital operation. In February 2023, Wuhan Huazhong Numerical Control announced plans to invest a total of 321 million yuan to buy the rights to use two pieces of land and 11 buildings developed on those lands from Wuhan Zhuoer Aviation City Investment Co., Ltd. (referred to as "Zhuoer Aviation City"), but because the transferring party Zhuoer Aviation City and Wuhan Huazhong Numerical Control have the same actual controller Yan Zhi under control, this related party transaction has caused market controversy, prompting the Shenzhen Stock Exchange to issue a special inquiry letter requesting the company to explain the necessity and reasonableness of this transaction. It is understood that as of the end of 2022, Zhuoer Aviation City's total liabilities amounted to 371 million yuan. If the transaction is successfully completed, the "Zhuoer Group" will receive cash inflow, helping to ease the debt problem. According to data from Hithink RoyalFlush Information Network iFinD, since its listing in 2011, ZALL SMARTCOM has only distributed dividends 5 times, with the most recent being the annual dividend in 2018 of HK$0.0258 per share. From 2018 to 2023, despite the company's revenue increasing from 56.116 billion yuan to 125.29 billion yuan, a growth rate of 123%, the company has not distributed any dividends during this period, indicating the company's financial situation is not robust. In the face of the pressure of macroeconomic recovery, ZALL SMARTCOM's debt ratio has risen rapidly, coupled with adverse news about the "Zhuoer Group" constantly emerging, these undoubtedly will further shake market confidence in the company.
13/09/2024

Tencent and Alibaba are ramping up their efforts in the overseas travel market, and the backend systems of mini programs are being connected with TONGCHENGTRAVELHopeGoo.

With the intensification of the final stage of the tourism market competition, the 144-hour transit visa-free policy is undoubtedly a catalyst. Faced with a huge blue ocean, Tencent and Alibaba have joined the competition for the overseas market. In preparation for the upcoming traditional Mid-Autumn Festival and National Day holiday, Tencent and Alibaba's international versions have already increased their efforts in the overseas travel market. WeChatHK and AlipayHK mini programs have both connected to the TONGCHENGTRAVEL international travel platform HopeGoo, meeting the needs of overseas tourists and tourists from Hong Kong, Macau, and Taiwan to book flights, hotels, and purchase tickets for attractions. According to reports, the integration of WeChat and AlipayHK mini programs with TONGCHENGTRAVEL's HopeGoo platform is based on the platform's current coverage of six major areas including flights, hotels, train tickets, tickets, boat tickets, and local entertainment, as well as its support for 16 global currencies and multiple operating languages, leveraging the overseas market "cake". According to TONGCHENGTRAVEL's second quarter 2024 financial report, the daily ticket volume for international flights reached a new high, with a year-on-year growth of over 160%, and international hotel room nights grew by nearly 140%. TONGCHENGTRAVEL's HopeGoo spokesperson stated that overseas tourists can click on the flight and hotel options in the WeChat HK mini program service menu and make bookings and purchases through HopeGoo. In addition to booking flights, hotels, and train tickets, the AlipayHK mini program also offers the option to purchase tickets for attractions, greatly enhancing the convenience for overseas tourists traveling in China. Industry experts believe that with the implementation of the new round of opening policies, the Chinese cross-border travel market is showing strong signs of recovery. In the first half of this year, the number of foreign tourists entering China increased by more than four times, demonstrating tremendous market potential. Behind this is a trillion-dollar consumer market, with cross-border travel services related to accommodation, transportation, travel, and entertainment consumption scenes, which serve as important "gateways" to access this trillion-dollar market. On the other hand, outbound travel is also an important breakthrough for domestic leading internet companies seeking a "second growth curve", with diversification of scenes being a key strategy. Cross-border travel and tourism markets are associated with a range of online and offline consumption scenes, and naturally become a "high ground" for giants to compete over.
13/09/2024
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