Some updates

And closing one idea

Recently Avrobio (AVRO) announced a reverse merger with Tectonic Therapeutic, which was a bit unexpected. And disappointing. From what I have read from people more knowledgeable about biotechs, they have some promising treatments in development with pretty impressive insiders. But I have no idea how to value this. Net cash will be <$1/share post merger so I am closing this with a small loss at $1.25.

Then I had a closer look at my TK group (HK:2283) position. Most of their end markets will see growth in 2024. And most interestingly, there seems to be somewhat of a pattern in insider buying of the CEO. He purchased 1.3% of shares outstanding in 2023. Only 0.5% in 2022 and 0.25% in 2021. But then in 2020 he purchased 1.8%. And incidentally 2021 turned out to be a great year. 2022 and 2023 were kind of mediocre when compared to 2021. So possibly a weakish signal the CEO is quite optimistic about 2024? 

And with its enormous net cash position, there is room for an increase in dividend payout. If they do hit analyst estimates of HK$0.38 in EPS, and dividend payout is increased to 60% next year, the stock would trade at 3.6x earnings and a nearly 17% dividend yield with its entire market cap in net cash. So I decided I needed a larger position in this stock. 

Then a possible new development on Galecto (GLTO). A poster on Stocktwits made an interesting observation that a GB1211 study is starting next month. GB1211 is one of GLTO’s more promising treatments. This study will last for several years, and GLTO doesn’t really have the money to fund it? But Providence wouldn’t be starting it if financing wasn’t secured, since this will take at least 4 years to complete. This either means nothing or some kind of sale is imminent. I think cash levels are too low for a reverse merger. So I decided to add a bit. 

Halyk Bank (HSBK) dividend estimate has been significantly increased for 2024. Current estimate is about $5.3 in eps and $3.4 in dividends on TIKR. Up from about $2.5 I think. This might have something to do with the fact that the current leadership isn’t happy with the fact that the Nazarbayev family (who used to run Kazakhstan) controls 70% of Halyk which has an extremely dominant position in Kazakhstan’s financial sector. And they are trying to sell a portion of their stake to take some of the heat off. So possibly they want to squeeze as much out of their stake as possible and try to create a higher share price? Currently the stock trades at 2.7x NTM PE and a 23% pre-tax dividend yield. I think withholding tax is 15% so that is a 20% post-tax yield. 

Anexo (ANX) released a trading update. Basically 2023 EBIT is in line with estimates. So no nasty surprises there. And they now have 32,000 emission claimants. In 2023 they settled 12,000 claimants for GBP 7.2m. So that is possibly another ~20m of high margin revenue secured for the next 2 years. 

The market wasn’t enthusiastic though. It seems that debt is a hurdle to rerate this. Net debt, not counting leases, is about 50m GBP. With likely net income of about 18-20m in 2023 and 2024. They could probably reduce debt close to 0 within 1 year by simply declining revenue a bit, firing some personnel and letting their working capital run off. So I am not sure why this is such a problem. Possibly because of the covenant they hit last year due to bad working capital management? The catalyst for this stock is simply to keep churning out steady/increasing earnings and use some of their cash flow to reduce debt and pay small dividends. I continue to hold.