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13 Jan, 2017 (Friday)

            
IMPERIAL PAC(1076)
Analysis¡G
Imperial Pacific International Holdings (1076) has just proposed to issue notes of not less than US$60 million in principal, which will provide sufficient funds for the construction of the Group`s "Imperial Pacific Resort Hotel. Saipan" in Garapan, Saipan. The hotel resort is located on the water front of downtown Garapan with approximately 350 suites. By the time it is completed, the hotel resort will bring about 200 to 300 gaming tables and 300 to 400 slot machines which will substantially increase the Group`s gaming capacity from its current level of 48 gaming tables and 144 slot machines at the temporary casino. (I do not hold the above stock)
Strategy¡G
Buy-in Price: $0.125, Target Price: $0.14, Cut Loss Price: $0.118

KPC Pharmaceuticals(600422)
Analysis¡G
During the past ten years, the operating results of KPC Pharmaceuticals have basically maintained a high growth rate of over 20%, except in 2008 and 2014 when the growth rate went below 20%. Though the result was not as good as expected since 2016, we keep optimistic about the mid- and long-term development of the company. There is still large space for the development of the Company`s Kunming traditional Chinese medicines and Xuesaitong Soft Capsules, etc. Concurrently, the Company focuses on creating the chronic disease management system, speeds up its medical business layout and shows a strong intention to engage in epitaxial mergers. The company has continuously pushed forward its refined marketing reform, set up new business departments like OTC, increased investment in the marketing business line integration and channel penetration, and strengthened incentives for frontline personnel. The Company`s marketing advantages are expected to be intensified. Besides, the Company plans to release "Liver-Soothing Granules and Xiangsha Pingwei Granules" as the golden prescription drugs and "Banlan Qingre Granules, Shenling Jianpiwei Granules, and Qingfei Huatan Pills" as the golden OTC drugs. Resources will be pooled to make a breakthrough in the sales volume of these five golden products and further drive the speedy increase in the botanical drug series.
Strategy¡G
Buy-in Price: CNY13.17, Target Price: CNY14.50, Cut Loss Price: CNY13.00


Tasly Pharmaceutical Group (600535.CH) - Positive Results for DSP FDA Phase III Trials

Positive Results for DSP FDA Phase III Trials

At the end of December, Tasly announced the results of the Phase III FDA randomized, double-blinded, international multi-center clinical trials of compound Danshen dripping pills (DSP): DSP has, at the primary clinical endpoint, a significant dose-effect relationship and can increase the effect of TED; the secondary endpoint of observation on curative effect supports the primary clinical endpoint, and an evidence-effect chain is formed. In the trial, a clinical study of DSP was carried out to interpret its formula basis, and its clinical safety is proved once again. No serious adverse events associated with the protocol or with DSP were observed throughout the trial period. Other general adverse events were infrequent, minor, and self-healing, and there was no difference in the incidence rate of adverse events among study groups.

The results showed that DSP can be proved to be effective under the FDA standard, and it is feasible to produce Chinese patent medicines approved by FDA under the strict GMP/GAP in the modern TCM production system. This is China's first Chinese patent medicine that completed the phase III clinical trial of FDA, marking TCM's major step toward internationalization and modernization. We expect the company will begin its listing application, and DSP to pass FDA certification and be listed in 2018.

The United States has a vast market for chronic angina pectoris, and the FDA has only certified two new drugs over the past 20 years. The latest is ranolazine (market size over USD600 million), but the side effects are great. DSP, as a botanical drug causing minor side effects, can be used for a long time and is more affordable, and is expected to take its share in the US angina pectoris market. Meanwhile, phase III results are expected to further promote DSP sales in the domestic market, since the FDA phase II trial data in 2010 has caused the revenue from DSP to increase by more than 20% in 2011 and 2012. In addition, the company will become China's international TCM platform, through which many products, such as Qilin pill, are expected to enter markets of developed countries. 

Channel Adjustment Basically Completed

In the past two years, the growth rate of the company slowed down obviously. In the first three quarters of 2016, the revenue from the pharmaceutical industry decreased by 14.5% YoY, and so did the profit, mainly due to the company's channel structure adjustment and the strengthening of accounts receivable management. However, the company's sales volume of principal products in the hospital market has maintained growth. We expect that the company's channel adjustment has been basically completed through channel destocking in 2016. Moreover, since 2008 the tender price cut of principal products has not been not significant, indicating a slight impact on the company by the controlled medical insurance fee. It is highly probable that the pharmaceutical industry will resume its growth in 2017. Also worth mentioning is that the company's Puyouke (recombinant human prourokinase for injection), Yiqi Fumai, Salvianolic acid and other varieties are expected to enter the National Drug Reimbursement List and to achieve rapid sales growth.

Bright Prospects for Leader in TCM Modernization

Tasly may well be the first TCM enterprise going abroad and become a leading enterprise in TCM modernization. The significantly increased brand influence, coupled with the end of channel adjustment, the company will resume its upward trend on results. In light of comparable companies, we give Tasly an estimation of 30x PE in 2017 and a 12-month target price of RMB46, with the "Accumulate" rating. (Closing price as at 11 Jan 2017)

Risks

Tender price limit;

Progress in FDA certification below expectations;

Financials

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Recommendation on 13-1-2017
RecommendationAccumulate
Price on Recommendation Date$ 40.040
Suggested purchase priceN/A
Target Price$ 46.000
Writer Info
Fan Guohe
(Research Analyst)
Tel: (86) 21 51699400-110
Email:
fanguohe@phillip.com.cn

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Phillip Research - Hong Kong ½÷¥ß¬ã¨s³¡ ¡V ­»´ä¤Î¤¤°ê
Company Stock Code Last Update Suggestion Target Price Price on Recom
Information Techology Research Department N/A+852 2277 6527research@phillip.com.hk
O-Net Technologies87727/09/2016No Rating4.02
O-Net communications87726/10/2010BUY7.156
Transportation and Automobiles Zhang Jing (86) 2151699200-103zhangjing@phillip.com.cn
Weifu000581.CH09/01/2017Buy29.422.95
China Southern Airlines105520/12/2016BUY5.244.09
Insurance Research Department (86) 21 51699400-110research@phillip.com.cn
Media & Publishing Research Department (+ 86 21 51699400-107)research@phillip.com.cn
Wisdom Sports Group166111/07/2016Buy3.32.18
NetDragon77716/06/2016Buy28.422.9
Pharmaceutical Fan Guohe  (+ 86 21 51699400-110)fanguohe@phillip.com.cn
Tasly Pharmaceutical Group600535.CH13/01/2017Accumulate46.000.000
Yunnan Baiyao000538.CH06/01/2017BUY90.673.9
Industrial Goods Ocean Pan +852 2277 6515oceanpan@phillip.com.hk
TK Group228310/01/2017Buy2.82.18
Health & Personal Care Fan Guohe  (+ 86 21 51699400-110)fanguohe@phillip.com.cn
Guangzhou Baiyunshan Pharma87418/10/2016Buy24.4819.16
Guangzhou Baiyunshan Pharma87417/10/2016Buy24.4819.16
New Energy Research Department (86) 21 51699400-110research@phillip.com.cn
CONCORD NE18224/10/2016Buy0.60.39
SINGYES SOLA75014/10/2016Buy5.14.12
Food, Beverage and Retail Research Department (86) 21 51699400-110research@phillip.com.cn
Xinyi Glass86828/12/2016Accumulate7.16.11
361 Degrees136121/12/2016Buy3.823.07
Telecommunications Fan Guohe + (86) 21 51699400-110fanguohe@phillip.com.cn
Chinasoft International35426/10/2016Buy4.863.72
Chinasoft International35425/10/2016Buy4.863.72
Mainland Property Research Department (86) 21 51699400-110research@phillip.com.cn
China Overseas Land & Investment68812/01/2017Accumulate24.422
Red Star Macalline152822/12/2016Buy9.47.1
Utilities Research Department (86) 21 51699400-110research@phillip.com.cn
CNTY000035.SZ11/01/2017Buy9.327.68
Beijing SPC00257330/12/2016Buy21.817.3
Software & Service Research Department (86) 21 51699400-110research@phillip.com.cn
Goldpac Group331518/02/2015N/A4.77
IGG800221/11/2014Accumulate3.953.44
Hotels and Entertainment Zhang Jing (+ 86 51699400-103)zhangjing@phillip.com.cn
Hongkong & Shanghai Hotels4505/01/2017Accumulate9.78.46
Great Eagle Holdings Ltd4129/12/2016Accumulate38.633.65

Information contained herein is based on sources that Phillip Securities (Hong Kong) Limited and/or its affiliates ( the ¡§Group¡¨) believe to be accurate. The Group does not bear responsibility for any loss occasioned by reliance placed upon the contents hereof. The Group (or its employees) may have interests in relevant investment products. For details of different products¡¦ risks, please view the Risk Disclosures Statement on http://www.phillip.com.hk.

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