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Wuxi Apptec WX Q1 2009 update

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(Update 2, May 20) Bought it back, looks like it has more room to run 🙂

(Update May 19) Sold out my WX positions. I had a second thought on the stock.

(Original) Formerly Wuxi Pharma Tech, the name change was to reflect the US based Apptec acquisition a year ago.

I have bought and sold WX a few times since its IPO in 2007 (Wuxi Pharma Tech looking good; Got some WX again; Wuxi Pharma continues to drop). I sold out my WX position last Sept. (shortly before Lehman’s fall). I decided to got back some WX again about 10 days ago. A few things have changed since last update:

1) Since Wuxi cancelled the secondary offering last May, the selling shareholder UOB sold shares to private equity firm Warburg Pincus.

2) WX had to wrote down a large portion of good will because buying Apptec at the wrong time (pulled trigger too earlier).

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WuXi Pharma WX continues to drop

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WuXi Pharma Tech (NYSE:WX) continued to slide, during my absence. One (main) concern is heavy insider selling (source: seekingalpha) lately, after the secondary offering was suspended on May 4.

I double checked the F1 filings for secondary offering (principal and selling shareholders), and found its CEO Dr. Ge Li was going to sell 8 million shares, and he unloaded 200,000 shares on May 30 according to AOL finance. BTW, it is a bit strange I could not find those transactions at SEC web site. Adding insult to the injury, United Overseas Bank (UOB) said it was going to sell 2.1 million shares at $18.4 each, according to Reuters. I guess they must need cash badly (hint: sub-prime trouble). Seriously, from its F1 it appears to me UOB is a venture investor in WuXi, and I am not surprised to see it wants to cash out some (note it intended to sell those shares in the now aborted Secondary). In other words, UOB still sells the shares planned in the Secondary, but the Wuxi management did not.

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Got some WX Wuxi Pharma again

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Wuxi Pharma logo

I bought some Wuxi Pharma (NYSE:WX) shares today, last year I traded it shortly after its IPO in Aug/Sept.

Recent developments
Q4 and full year 2007 results (MSN Money): total net revenues increased 93.3% to $135.2 million (compared to 2006);

Chemsitry CRO of the year by Pfizer;

Q1 2008 results to be released on May 27;

Wuxi postponed secondary offering today; here is F1 prospectus for secondary offering (I have not found its 2007 annual report).

Background (in Chinese)

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Fourth quarter 2007 update

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The miserable performance of CROX erased much of my 2007 gains. But thanks to the rebound of Mindray (MR), I am still be able to be above water 🙂

Some random thoughts of Q4 and year 2007 stock performance:

1) Crocs (CROX): I agree with my friend StrengthTrader, Crocs is a fashion product. It’s almost unbelievable for Crocs to become popular in much of the world in such a short time. At least it grew much faster than Nike did 20 years ago. But will Crocs be as big as Nike some day? I don’t know. The market thinks it will NOT (traded at PE of about 20, the company projected 35 to 40% revenue growth in 2008).

2) Mindray (MR): benifit from the global spending of healthcare. Although the US market did not turn out to be as successful as we like, other interntional markets especially South America made up the slack.

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Squeeze the bubble

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In last few days many new Chinese IPO listed in the US are under pressure, notablly:

E-House China (EJ), China Digital TV (STV), Wuxi Pharma (WX)

and last but the least, Giant Interactive (GA), the No. 1 online gaming company in China, owned by well known Chinese entreprenur Mr. Shu Yuzhu. According to CnAnalyst, GA also has the highest margin in all Chinese stocks listed in the US, with a gross margin 90% and net margin 70%. It sounds to me they are in drug dealing business 🙂 Because those numbers easily beat monopoly companies such as PetroChina (PTR) and China Mobile (CHL), or leading search company Baidu (BIDU).

All right, I shall be more positive in my blog: actually I like Wuxi Pharma among those new companies, along with the Longtop (LFT) I mentioned earlier. Because I think their business are more sustainable.

Wuxi Pharma Tech pic

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Is the Chinese bull market over?

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(Update Nov. 17) Shuipi of ChinaTimes(水皮华夏时报) wrote this interesting piece on his newspaper.

(Original) It looks like it, from the highs at 6,200 in early Oct to 5,200 now. But wait a minute, recently the US stock market suffered big loss because of the sub-prime meltdown, and weakening of the dollar. How could the mess in the US drag down the Chinese stock market?

Well, one can say we are in a global economy now, the ripple effect of US sub-prime meltdown means the US business and consumer will watch their wallet more carefully, which is bad for Chinese exporters. We all know the Chinese economy depends a lot on exporting to the US.

China Mobile logo

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Wuxi Pharma Beijing Bank

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I sold Wuxi Pharma Tech (WX) this morning, at $28.81. Not surprisingly the stock continued up after I sold it. I bought it a month ago at $21.80 so I’m happy. The stock is a bit expensive at current price ($30), considering its PE (about 100), profit margin, and its 2007 est. revenue. Another thing to consider is competition. It’s definitely more difficult than open economy hotels (Home Inns, HMIN), but I think it’s still doable (exp. and connections with big pharmas in the west).

Separately, Beijing Bank did IPO today in Shanghai, under tick symbol 601169. It started at 23.00, went as high as 25, and closed at 22.68. At current price, its year 2007 PE is more than 50. Crazy!

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WuXi Pharma Tech Q2 results

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Here are the results from Yahoo Finance, some highlights:

Second Quarter 2007 Highlights:

— Total net revenues increased 99.3% over the second quarter of 2006 to
US$30.2 million. (1H revenue $64 m, slight decline over Q1 2007?)
— Net income increased 482.1% over the second quarter of 2006 to US$7.1
— Diluted earnings per American Depositary Share (“ADS”) for the second
quarter of 2007 was US$0.11. Diluted earnings per ADS excluding share-
based compensation expenses (non-GAAP) for the second quarter of 2007
was US$0.13.

The stock took a hit last Thursday because the market expected more for its year 2007 outlook. Currently the company expects rev of $128 to 132 million.

On business level, I like Wuxi’s business model and the global outsourcing trend in the pharma R&D. One concern of outsourcing is margin. I’m listening to its Conference Call now, will add comments if I find anything interesting.