Sep[7] - Tianjin ZX USD (Attractive Discount)

COUNTER: Tianjin Zhong Xin Pharmaceutical Group Corporation Limited

OVERVIEW:
The company produces and sells traditional Chinese medicines (TCM, which is its core business), western medicines and healthcare products primarily in China. It has a complete industrial chain, product chain around its core business. Some of its units which engage in chemical drug, bio-medicine are operated jointly with world famous pharmaceutical giants like GlaxoSmithKline.

With its product variety, 4 have been honored as National Treasure like creation; 10 are stated protected Chinese medicines, 67 listed in National Basic Medicine Catalog, 267 are available in national medicine insurance service system. It has one state-level enterprise technology center, five municipality-level enterprise technology engineering center on China. It was listed in SGX on 1997 and on Shanghai Exchange on 2001.

HIGHLIGHTS:
[1] Its latest result registered 1H2016 revenue and profit at RMB3.2b and RMB288m, which maintained year on year. Its income has been very stable over past 4 years.

[2] On April 2016, HK Department of Heath announced that one batch of TCM tablets from the counter containing traces of Western drug which is not listed in its authorized prescription. Relevant product was recalled from HK and production ceased thereafter. Investigation ended on June, the factory has resumed and relevant certifications was reinstated.

[3] It's in net cash position, since cash on hold can fully meet debts.

INVESTMENT THEMES:
[1] Current S-shares (listed in SG) valuation:
Book value - USD0.79 || Earning per share (1H2016) - USD0.051 || Dividend (2016) - SGD0.031
At shares price USD0.75, it translates to P/B ~ 0.95, P/E ~ 7.5, Dividend yield ~ 3%

[2] Its A-shares price (listed in Shanghai) is generally valued at P/B > 3, PE > 20.
By comparison, its shares price in SG looks over-discounted. Considering recent de-listing activities in domestic market, it would be hard not to speculate when the counter becomes next candidate.

[3] The counter shares is denominated in USD. Recent exchange rate of USD-SGD hovers at its one year bottom. The falling of exchange rate coincided with price weakening moment of the cash rich counter. The timing looks just perfect.

PRICE TREND:
The counter's S-shares actually rebounded from its three years support ~ USD0.73.

It's A-shares price movement as below. Difference price trend shown.