Abbisko Cayman Limited (2256 HK)
Industry SectorPharmaceutical Issue Price (HK$)12.16 to 12.46Total Share Offer Size (HK$ Mn)1,753.6SponsorMorgan Stanley, J.P. Morgan, and CICCDealing of Shares13 October 2021
Abbisko Cayman Limited is a clinical-stage biopharmaceutical company dedicated to the discovery and development of innovative and differentiated small molecule oncology therapies. Since its inception in 2016, it has strategically designed and developed a pipeline of 14 candidates focused on oncology, including five candidates at clinical stage. Their product candidates are primarily small molecules that focus on small molecule precision oncology and small molecule immuno-oncology therapeutic areas. The company has two Core Product Candidates, ABSK011 and ABSK091, and 12 other pipeline product candidates. ABSK011 developed in-house is a potent and highly selective small molecule inhibitor of fibroblast growth factor receptor 4 (FGFR4); ABSK091, licensed from AZ, and previously known as AZD4547, is a molecularly targeted product candidate and a highly potent and selective inhibitor of FGFR subtypes 1, 2 and 3.
The Core Product Candidates are primarily being developed for hepatocellular carcinoma (HCC), urothelial cancer (UC) and gastric cancer (GC) at the current stage.
The company currently has no product approved for commercial sale and has not generated any revenue from product sales. It has incurred operating losses during the track record period. Loss before tax was RMB133.9mn/706.6mn/123.5mn in FY19/20/3M21. Substantially, all of the losses come from research and development expenses and administrative expenses.Key risks factorsFierce competition from existing products and product candidates under development in the entire oncology market, in particular in the FGFR inhibitor market, in addition to approved oncology therapy options.Business and financial prospects depend substantially on the success of their clinical stage and pre-clinical stage drug candidates. If the company is unable to successfully complete their clinical development, obtain relevant regulatory approvals or achieve their commercialization, or if it experiences significant delays in any of the foregoing, its business, results of operations and financial condition may be adversely affected.Its rights to develop and commercialize some of their drug candidates are subject to the terms and conditions of licenses granted to them by others.It relies on third parties to supply active pharmaceutical ingredients (APIs) and/or manufacture its drug products when approved, and its business could be harmed if those third parties fail to provide them with sufficient quantities of the APIs or the drug product or fail to do so at acceptable quality levels or prices.All material aspects of the research, development, manufacturing and commercialization of pharmaceutical products are heavily regulated and the approval process is usually lengthy, costly and inherently unpredictable. Any failure to comply with existing or future regulations and industry standards or any adverse actions by the drug-approval authorities against them could negatively impact their reputation and business, financial condition, results of operations and prospects.11 cornerstone investors have subscribed HK$990mn worth of shares which account for 56.6% to 58% of the offering. Well-known strategic investors include Qiming Venture, GIC, Temasek, Blackrock and Carlyle.
Wilmar (WIL SP): Palm oil prices to the moon
BUY Entry – 4.20 Target –4.85 Stop Loss – 4.03Among the big boys. Wilmar is ranked among the largest listed companies by market cap (S$27bn market cap as of 30 Sep) on SGX. The company’s business activities include oil palm cultivation, oilseed crushing, edible oils refining, sugar milling and refining, manufacturing of consumer products, specialty fats, oleochemicals, biodiesel and fertilisers as well as flour and rice milling.Negatives priced in. Shares of Wimar have declined almost 30% from the 5-year peak of S$5.57 reached in February 2021. This rally and subsequent decline was driven by the IPO of its China subsidiary, Yihai Kerry Arawana (YKA), on the ChiNext board of the Shenzhen Stock Exchange. There was further selling pressure over the past month after the planned IPO of Wilmar’s JV with Adani Group of India was placed on hold amid probes by the Indian regulators. Upside catalyst from robust palm oil prices. Palm oil prices ended the quarter near record highs amid concerns over tight vegetable oil supplies while demand has remained strong. Futures for December delivery rose 3% yesterday, and have gained 28% in 3Q2021 as other edible oil and oilseed prices gained, including soybean oil, canola and rapeseed. Adding salt to the wound, there’s growing concerns that the power crunch in China will impact production of soybean oil, thus driving demand for palm oil. Bullish consensus forecast. There are 13 BUYS / 1 HOLD / 0 SELL and an average 12m TP of S$6.00 (+43% upside potential). Wilmar currently trades at 12x and 11x FY2021 and FY2021 P/E, driven by 6-8% EPS growth in the next two years. Dividend yield is a decent 3-4%.
Crude Palm Oil Futures
LHN (LHN SP): Optimise, advertise, monetise
BUY Entry – 0.335 Target –0.49 Stop Loss – 0.30LHN is a real estate management service group which specialises in space optimisation. The company also provides facilities management and logistics services, which complements its space optimisation business.Strong top and bottom line. Revenue increased 20.8% YoY to S$134mn in FY20, while net profit surged 183.0% YoY to S$24mn. The jump in net profit was mainly due to better gross margins of 47.4%, which was almost double from the prior year. Strong bottom-line was supported by Job Support Scheme (JSS) and rental rebates of S$4.7mn, as well as an investment gain in subleases of S$6.9mn. Eliminating one-off gains, core PATMI for FY20 stood at S$11.3mn, an increase of 40.9% from FY19.Catalysts. A solid FY22 revenue growth is expected from the space optimization business, given that 4 residential properties are expected to commence operations. Revenue and earnings drivers include reopening of borders and positive momentum of co-living trends. Meanwhile, the facilities management segment is expected to grow in tandem with the space optimization business, coupled with recurring dormitory management income. Finally, the logistics management segment is expected to grow in line with robust shipping activity.Attractive valuations. We initiate LHN with an Outperform recommendation and a TP of S$0.49. Our TP is based on 6.0x P/E to its FY22F EPS of S$0.082. Read the full initiation report here.
The Hong Kong market is closed today in observance of the National Day holiday. Trading resumes on Monday, 4 October 2021.
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