Some Updates #2

One new idea, and closing one

First a new holding, Nameson Holdings (HKG:1982). A vertically integrated knitwear and fabrics manufacturer with most of its production base in Vietnam and some of it still in China. They expanded to Myanmar, which did not work out so well, so they had to take significant write-downs and restructuring costs recently of 243 million HK$. This somewhat obscures their true earnings power.

The stock has no net debt, trades at about 3-4x earnings here with a LTM dividend yield of 30%. Profit margins have been reasonably stable. I don’t think this should trade at 12-13x earnings, but at least at 6-7x? If those large dividends keep coming in and they can keep their profit margins stable, you get your money back in a few years from dividends alone. The stock hasn’t really crashed, but an ongoing dividend yield of 20-30% might provide a catalyst for rerating the stock. 

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Following the tradition of buying the rumour and selling the news, I am closing DADA here with a nice 64% gain. The independent review just concluded and did not find anymore irregularities. JD also posted some great results. The stock is trading almost at the same level as before the news of irregularities a few months ago. I don’t really have a strong opinion about the business itself. The stock looks somewhat cheap here, but there are more interesting bargains to be found. 

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Another development regarding Galecto (GLTO). This recent interview with the CEO has some interesting details. You can make a free account to read it yourself without posting credit card info. Some interesting quotes (translated with google translate):

If Hans Schambye does not leave the fledgling biotech company Galecto Biotech prematurely and at the same time manages to get all or parts of the company sold within the next few months, the CEO can look forward to a handsome bonus.

The bonus is up to 60% of his annual salary. Which is about $300k.

"So it's about preserving as much value in the shares as possible and protecting the shareholders' interests, which is why the board wanted to enter into such a bonus agreement," says Hans Schambye, who also has a seat on the eight-person board.

And:

Is it perhaps an expression that you are close to having a clarification for the company in place? 

“I cannot comment on that. As a listed company, what I can say is very limited. I can only confirm that we have this analysis underway and that it is moving forward," says Hans Schambye.

And:

Where do you think, Hans Schambye, that Galecto stands on June 30, 2024? 

"I am firmly convinced that we are in a better place than we were when we started our process".

So I decided to add some more in the mid 60’s. A pretty pessimistic further $15m cash burn before a wind-up leaves about the current share price in net cash for shareholders. If they fetch $50m for their assets in the next few months and the shares trade at a 30% discount, the upside is about 200%. 

Twitter thread with more info here (Otto has added to his stake recently as well). He pegged the value of IP at $50-200m. So there is even potential for this to be a timely 10-bagger. But don’t count on it. Even if proceeds are merely $10m, and this is liquidated with a more pessimistic $20m further cash burn (cash burn last Q was only about $4m before one-off expenses), downside is pretty well covered.

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JNBY (3306:HK) released their earnings, and it was way better than expected. This stock is starting to have all the hallmarks of a compounder. It has significantly outperformed the Hang Seng since writing it up, especially for anyone who doubled down last year. 

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Anexo Group (ANX) gave a presentation at the Proactive One2One investor forum about their business. Clip is about 22 minutes long.

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111 inc. (YI) has officially called off the buyout. Will be curious to see what they will do next, since they do not have enough cash on hand to pay their minority investors. Supposedly Q4 will be quite good and they are still in a growth market. Possibly a sale of the company or a Hong Kong listing? YSB is still trading at a large premium. Although they do not have the problem of being unprofitable and having to pay a large liability. I only have a <1% tracking position, but it might become interesting if the stock declines further. 

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Record highs in travel, consumption were recorded during Chinese New Year. This should bode well for Greentree Hospitality (GHG)? For anyone who paid attention there were some nice opportunities to trade around in this stock in 2023. A positive catalyst will be a dividend and further margin increases as new hotels mature. The stock trades about 25% below where I first opened the position last year.

Readers of this blog should do their own due diligence before buying or selling anything, since I have been wrong before and cannot guarantee all information in this write-up is 100% factual. I may buy or sell the above mentioned stocks at any time.