Samsung Biologics solved regulatory risk more or less, but..

2018.7.17
Samsung Biologics
Closed at 410,000 (+1.99%) Target to 350,000 (-14.63%)
Indices
KOSPI200 297.37 (-0.43%)
KRX Hlthcare 4,139.99 (+0.75%)
G 10y 2.546% (-0.010%)
USDKRW 1,129.20 (+0.51%)

1. Securities & Futures Commission’s judgement : there isn’t actual problem in accounting of the company. Decision from Securities & Futures Commission included in Financial Services Commission reduces the burden for the company, which was imposed to by Financial Supervisory Service which is working under FSC. SFC cleared there will be no delisting for Samsung Biologics, and this leads to rise of about 2% of the share-price. Even though prosecutors are working on the case, I think that it’s reasonable enough to decide regulatory risk is released, considering there isn’t actual problem in value of the company. The problem was in way of the accounting which don’t bring problems to the markets in now, not value of the assets or the amount of sales.

2. The sector is going through overall slump. A few weeks ago, a Japanese drug maker, Takeda pharmaceutical, announced acquisition of Shire which got competitive-edge in drug for a rare disease. The executives said the company has to take M&A to overcome severe global-competition. Analysts are pointing out that there aren’t successes in testing new drugs in Japanese pharmaceuticals nowadays. Actually, main business of Samsung Biologics is bio-similar, which just make copy of existent drugs when the patents expire. But the problem is the sector which the company is included in. To many investors, the important is the sector, not individual company’s outperformance.

3. And Bio-Similar is also going through slump. In United States, one of the main policies of President Trump, which is being covered by trade-war, is decrease of price of drugs. A few days ago, a Twitter message from the president targeting Pfizer, refrained the company from increasing their products. US players, Novartis and Sanofi, are trying to sell their Generic divisions. Competitions for Generic and Bio-Similar are getting severe continuously, and the situation is giving challenges for US, Europe and Japanese players. With pricing pressures from US and decreasing margin with severe competition, they need new drugs. It means Samsung Biologics which don’t make new drugs, face more worse situation than others do.

4. Booming Korean-Bio looks like end already. Since end of last year, Bio companies including Samsung Biologics, Celltrion and SillaJen were skyrocketing with expectation for support to KOSDAQ and tech-venture from government. Of course, expectation went to wrong direction. After a few weeks, Bio-sector hasn’t been reaching to the former highest position with halving share-prices in KOSDAQ companies like SillaJen which doesn’t have appropriate business model for being $5bn company. Samsung Biologics isn’t different from them considering there aren’t enough business models to $30bn company. Even if Samsung conglomerates are supporting it, it’s not enough in volatile market to jump again.

5. Target price is KRW350,000, which was recorded at May 4. Based on Technical point, my target price is KRW350,000 which comes up gradually, not in just one day like SillaJen. Considering volatilities are swinging their arms in the FX markets, dropping KRW, the sectors in EM, which couldn’t generate enough profits, would be going to volatilities unlike their counterparts in US.

Mr. Banker, http://markety.tistory.com

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Samsung Biologics (July 17, 2018).pdf