Kingworld Medicines 1110

[winston]

Not vested. From Phillips:-

Valuation

Compared with its peers, SINOPHARM (1099.HK), SHANGHAI PHARM (601607 CH) and CHINA NATIONAL (600511 CH), the industrial average 10 PE is 39.97x; while compared with International peers, AMERSOURCEBERGE (ABC US) and CARDINAL HEALTH (CAH US), the industrial average 2010 PE is 13.64x.

We set fair 2010 PE and EPS of the company to be 28x and HKD 5.09 cents respectively. The market shares and market cap of the company results in the great discount of the fair PE relative to the PRC peers.

Yet, the higher profitability and growth potential of the company's market (coastal area of PRC) deserve a higher valuation ralative to international peers.

Fundamentally, our Target Price is HK$1.43, which is closes to the average of offering price range. Yet, we won`t rule out the short-term rally because of the small number of issuing shares. Rating: Neutral.


Risk
- Concentration risk related to Nim Jiom Pei Pa Koa
- Expansion of the company may be worse than estimated
- Seasonal demand of Nim Jiom Pei Pa Koa worse than estimated

[winston]

Not vested

DJ MARKET TALK:Kingworld +30.0%;SHKF Flags Reliance On Pei Pa Koa

1031 [Dow Jones] NEW LISTING: Kingworld Medicines' (1110.HK) key risk lies on over-reliance on single product, Nin Jiom Pei Pa Koa, which accounts for 73% of 1H10 revenue.

SHK Financial notes selling price for Nin Jiom Pei Pa Koa distributed by Kingworld set by supplier; in 2009, purchase price increased by 8.0%, but selling price was kept stable, resulting in 2.4 ppt on-year drop in gross margin.

Kingworld last +30.0% at HK$2.08, valued at about 23X FY10 prospective earnings; while this is significant discount vs Sinopharm's (1099.HK) 43X, it's likely justified given Sinopharm's much bigger market share, Kingworld's single-product risk.

Already 96 million shares exchanging hands, vs 150 million shares offered.

Source: Dow Jones Newswire

[winston]

Kingworld Medicine turns to control tonic
Wednesday, May 25, 2011

Kingworld Medicines (1110) is set to take a majority stake in one of its mainland client firms before year's end.

Zhao Li Sheng, chairman of the medicine importer and distributor, was not divulging the name yesterday, saying only that it and Kingworld have worked together for 10 years and "we will be controlling shareholder, offering exclusive distribution rights of products."

Kingworld listed in November, and about 60 percent of the HK$130 million raised was earmarked for acquisitions.

"We will only consider acquiring candidates whose annual sales reach 200 million yuan [HK$239.35 million] to 300 million yuan," said Zhao.

Kingworld aims to have up to 3,000 display booths at outlets by year's end - double the number last December. And it is launching more higher-margin items such as organic milk powder.

Kingworld Medicines (1110) closed 1.01 percent higher at HK$1.84.

GRACE CAO

http://www.thestandard.com.hk/news_deta ... 10525&fc=4