Apr 26, 2023Liked by IJW

Thanks for this. Re: 111, is there any risk re balance sheet? I see this mezzanine debt line and the special sits guy writes on Seeking Alpha: "the company seems highly unlikely to be able to fund the redemptions if a STAR listing is not completed".

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Seems like they added another year:

"The Group has evaluated subsequent events through April 28, 2023, which is the date when the financial statements were issued.Since January 1, 2023 till April 28, 2023, the Company negotiated with investors of 1 Pharmacy Technology in the contingently redeemable non-controlling interest in 1 Pharmacy Technology, and has obtained commitments from certain investors, who agreed to not exercise their redemption rights before June 30,2024 in connection with redeemable shares amounted to RMB584 million as of December 31, 2022, and one investor holding redeemable shares of RMB114 million has made the same undertaking , subject to certain customary conditions."

This is about 70% of the liability.

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Apr 26, 2023·edited Apr 26, 2023Author

Liability is $144m, which values the company at $1.5bn. They have $127m of cash on hand. And if they hit that 2% net profit target, profit would be $60m. Current estimates for 2023 are $24m in net profit on $2.8bn of revenue. So I think if it is redeemed it could be funded with a combination of cash on hand, new shares and debt. Say a $45m share issuance, $45m from their cash position and $54m of debt?

But since this stock could probably fetch more than the redeemable amount on the Shanghai stock exchange, I don't think redemption is likely, unless the investor group thinks it is unlikely a Shanghai listing will happen anytime soon. Or unless they think IPO valuations will collapse.

There will be a listing on the HK exchange this year of YSB, a similar business, and they are expecting to raise $300-500 million of capital. That implies a ~$2bn+ valuation. They had 10bn RMB of revenue in 2021, vs 12bn for YI. with similar growth rates and margins.



It seems to me incentives overwhelmingly point to a buyout happening at some point this year, with possibility of a raised offer. But they probably want assurance from the minority investor that they won't suddenly get cold feet and redeem their shares right after the buyout? So it wouldn't surprise me if they are negotiating with them right now to participate in the buyout.

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Life would ve been much simpler if you'd picked kaspi last year over pagseguro

(I did .20% of portfolio. Just bragging...lol.i really respect your work)

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We enjoy getting your thoughts and investment write-ups. Keep it up!

Here’s our take on GTXAP.


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