Deep Value Gems: Multi-Bagger Potential of a High-Yield Generic Drugmaker
(This is part of a series focusing on deep value stocks that offer high dividend yields and possess good fundamentals. The current bearishness in Chinese stocks has unveiled numerous such exceptionally cheap opportunities, which we will reveal over time.)
Jacobson Pharma (SEHK:2633) is a Hong Kong-based pharmaceutical company that focuses on the production and sale of generic drugs.
Jacobson Pharma is trading significantly below its asset value, with a Price/Book ratio of just 0.5x. We can apply an additional discount to the assets for a more conservative valuation.
It's important to note that Jacobson previously had a subsidiary, JBM Healthcare (SEHK:2161). Jacobson's stake of over 50% in JBM Healthcare was distributed as a dividend-in-specie to its shareholders. Consequently, JBM Healthcare is no longer a subsidiary, and its financial figures were deconsolidated from the interim results in FY24. Therefore, our calculations will be based on the interim results to reflect the current status of Jacobson's remaining business and assets.
Breakdown of Assets
Cash = HK$871.048m
Investment Properties = HK$321.336m
Land and Building = HK$813.911m (estimated since interim notes didn’t provide)
Total value of good assets = HK$2,006.295m
Total Assets = HK$3,987.544m
Liabilities and Interests
Total Liabilities = HK$1,682.141m
Non-controlling interest = HK$24.261m
Net Value Calculation
Conservative Value = (Good Assets + 50% of Remaining Assets - Total Liabilities - Non-Controlling Interest) / number of shares = HK$0.68 per share
Share price = HK$0.57