InvestIdeas

Not vested.

RESEARCH ALERT- DMG raises C&O Pharm target price to S$0.50

SINGAPORE, April 6 (Reuters) - Following is a list of Singapore stock price target changes and rating changes on Tuesday.

COMPANY RIC BROKER RATING (PVS) TARGET PRICE (PVS) C&O Pharm DMG Buy (Buy) S$0.50 (S$0.36)

STATEMENT: We have upped our revenue forecast by 7.7% to HK$632.9m, as we raised our expectations of C&O-branded products sales. C&O achieved gross margins of 62% in 1HFY10 and is expected to maintain that margin going forward, backed by increased sales and continued strong demand for its exclusive products.

C&O's R&D drug projects have been selected for sponsorship under the Chinese government's Mega New Drug Development Programme. Under the programme, C&O received initial funding of RMB1.1m on March 10 and will be granted an additional RMB6.4m as project benchmarks are met.

The sponsorship reflects the Chinese government's recognition of C&O's R&D capabilities and its strength in this area, thus boding well for the firm as it continues to develop its C&O-branded drugs.

Target price is raised to S$0.50, based on 12x FY10/11 blended earnings. This is a steep discount to its China-listed peer average of approximately 36x P/E. Given its good growth prospects, stable cash flows and strong balance sheet, we maintain our BUY recommendation for this stock.


Source: Reuters

Not vested. From Phillips:-

C&O Pharmaceutical – Initiation (Toh wei kiong)
Recommendation: Buy
Previous close - $0.39
Fair value - $0.53

· Beneficiary of the RMB850b healthcare reform
· Strong performance by C&O branded drugs
· More exclusive distribution agreements
. Strong balance sheet with negligible debt
· Initiating coverage on C&O Pharmaceutical with a BUY rating and fair value estimate of S$0.53 representing a potential upside of 35.9%

Invested

This counter is already announce its dividends and reported at SGX. I believe that people will start buying this counter before they started giving out their dividends in July and August

Alloycious wrote:Invested

This counter is already announce its dividends and reported at SGX. I believe that people will start buying this counter before they started giving out their dividends in July and August

Hello Alloycious,

Welcome to Investideas.

Hope that you will find your stay here fruitful.

We look forward to more of your postings in the future.

Cheers,
mm

Alloycious wrote:Invested

This counter is already announce its dividends and reported at SGX. I believe that people will start buying this counter before they started giving out their dividends in July and August

Hi there,

Any other compelling reasons for choosing to buy this company, other than the dividends?

Thanks!

Musicwhiz wrote:

Alloycious wrote:Invested

This counter is already announce its dividends and reported at SGX. I believe that people will start buying this counter before they started giving out their dividends in July and August

Hi there,

Any other compelling reasons for choosing to buy this company, other than the dividends?

Thanks!

Hi there,

As what i know about this company, just based on their customers base and market share on healthcare and distributing drugs. Their customer base is in all parts of china.

To me, their business is stable and monopolised.

Regards

San San wrote:Oh. Used to like this Sihuan counter.

hi san san
any comments on C & O Pharma?

Not vested

C&O PHARMACEUTICAL TECHNOLOGY - C&O Pharmaceutical said on Wednesday Sumitomo Corporation <8053.T>, a major trading company that has pharmaceutical businesses, has bought 29 percent of the firm's issued shares for S$96.2 million or S$0.50 per share.


Source: Reuters

This is not just an equity stake investment by Sumitomo Corp (SC). The Japs are prepared to get their hands dirty - they will have 3 directors on board and also have the Chairman seat. From the press release, SC have great plans for C&O - even stating specific growth targets of doubling revenue in 5 years - from Jap culture that is almost a certainty cast in stone - if not the CEO have to do a Seppuku (切腹, "stomach-cutting") when targets are not met!!!! hahaahha!

Most probably this is just a stepping stone and foothold by the Jap Conglomerate. Interesting development.

At least one can be assured that a full Due diligence has been conducted by M&A team and financial advisor. That C&O Pharm's bank account has real $$..


Press release by Sumitomo:
Investment in a Singapore Stock Market-listed Chinese Pharmaceuticals Company
Marks a Fully Fledged Advance Into the China Pharmaceuticals Market

Sumitomo Corporation (Chuo-ku, Tokyo; President and CEO: Susumu Kato; hereinafter, Sumitomo) has agreed to aquire from the major stockholder Leo Star Development Limited (the English territory of the Virgin Islands; hereinafter, Leo Star) a 29% share in a Singapore Stock Market-listed C&O Pharmaceutical Technology Holdings Ltd. (Group)(the English colony of Bermuda; Chairman: Gao Bin; hereinafter, C&O). The result is that, after Leo Star, Sumitomo will become the second largest stockholder in C&O and through them will mark its fully fledged advance into the mainland China pharmaceutical market.

The future outlook for the rapidly expanding the China pharmaceutical market is expected to see growth of more than 15%. By 2020, the China Pharmaceutical market size is said to reach US$130 billion and exceed Japan, being the second largest after the U.S.. C&O is a pharmaceutical company based in China, which is involved in the R&D, manufacturing and sales of pharmaceuticals, selling ethical drugs to 300,000 hospitals and pharmacies all over China.

Sumitomo has long been active in the new drug licensing business. Now through C&O, in addition to introducing new drugs from Japan,the U.S. and Europe into China's pharmaceutical market, Sumitomo will embark on pharmaceutical development on contract basis, utilizing C&O's R&D platform.

Moreover, making use of Sumitomo's global supply chain, Sumitomo is thinking of providing C&O with highly competitive active pharmaceutical ingredients and to export C&O branded products to South East Asia market, through which Sumitomo plans to double C&O's turnover to be 15 billion Yen within the 5-year range. With the capital participation this time, supplying high quality and safe pharmaceuticals to China through C&O, Sumitomo will contribute to enhancing the level of medical care in China, and maintaining/improving the health of people in China.

<C&O Company Details>
Official Name : C&O Pharmaceutical Technology (Holdings) Limited
Date of Establishment: 2003 (Listed in the Singapore Stock Exchange in 2005)
Address : Registered in Bermuda
Scope of Operations : R&D, manufacturing, importing and sales of pharmaceuticals
Annual turnover : Approx. 7 billion Yen


Press Release by C&O Pharma:
Sumitomo Corp acquires 29% strategic stake in C&O Pharmaceutical for S$96 million
Sumitomo will become the second largest shareholder of C&O

SINGAPORE – 1 December 2010 – Mainboard-listed C & O Pharmaceutical Technology (Holdings) Limited (“C&O” or “the Group”) today announced that Sumitomo Corporation (“Sumitomo”), has entered into a sale and purchase agreement with Leo Star Development Limited, an investment holding company helmed by C&O’s Executive Chairman Mr Gao Bin, for a 29% stake in C&O for a consideration of S$96,187,000 or S$0.50 per share.

Sumitomo Corporation is one of the world’s largest integrated trading companies engaged in multifaceted business activities around the world with more than 25 domestic offices in Japan and 115 overseas offices spanning over 65 countries. In the financial year ended 31 March 2010, Sumitomo’s revenue totalled JPY2,884.2 billion (USD 31,013 million) and net income attributable to shareholders amounted to JPY155.2 billion (USD 1,669 million)1. Its strategic investment in C&O signifies a vote of confidence in C&O’s integrated competencies and business prospects.

Upon completion of the acquisition, Leo Star and Mr. Gao together will own approximately 29.17% in C&O while Sumitomo will be the Group’s second largest substantial shareholder with 29% interest. Committed to be actively involved in steering C&O’s growth both domestically and internationally, Sumitomo will nominate three executive directors to sit on C&O’s Board, who will replace three existing directors of C&O, and one of whom will be designated as Chairman of the Board while Mr Gao will be redesignated as the Group’s Vice Chairman, and will continue to service the Group.

Said Mr Gao, “Today, I am delighted to welcome Sumitomo to be our substantial shareholder. Our partnership with Sumitomo symbolises a new era for C&O. Undoubtedly, Sumitomo’s expertise in corporate management, global network and experience in developing international markets will further strengthen C&O’s core competiveness, and help to expand our business in the China healthcare market, as well as explore export markets in Southeast Asia.”

“Coupled with our extensive distribution network and marketing experience in China, C&O will become a leading player in the China market, with an aim to deliver more quality products to consumers. I look forward to working closely with the Sumitomo team to achieve this goal.” Mr Gao concluded.

______________________________

Interestingly, SC also done a similar deal in 2006:
"HENAN, Feb 13, 2006 (SinoCast via COMTEX) -- One of Japan's three biggest consortiums, Sumitomo Corporation, has obtained the approval from China's Ministry of Commerce to invest in a pharmaceutical manufacturer in central China's Henan's Province, Henan Topfond Pharmaceutical Co., Ltd., according to Topfond.

Sumitomo and its China operation will get Topfond's 20% of shares from the company's biggest shareholder for CNY 170 million.

After the deal, the Japanese buyer will become Topfond's second largest shareholder, while its old biggest shareholder will still have a controlling 51.124% stake. "
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Sumitomo's stake of 20% shares is for 80mil shares (400mil shares outstanding then). Now they own only 20mil shares now is only 4.8% (416mil shares) as they have been selling in the open market (for reasons unknown).

So SC is not entirely new to China drug market - Henan Topfond revenue grew from RMB 1253mil (FY06) to RMB2235mil (FY09) in 4 years time - in line with a double growth in 5 years! haha!! But do note that Topfond is not a profitable company. So probably the Japs got fed-up. But nevertheless, share price rose from RMB3+ in FY06 to RMB12 now - a four-bagger in 4 years time ever since SC got involved - even though no direct correlation.