报告名称：Biostime Alert(01112.HK)Not much loosening from MOF new clarification;maintainin
报告类型：港股研究
报告日期：2016-04-17
研究机构：德意志银行
股票名称：BIOSTIME
股票代码：01112
页数：1
简介：CBEC new regulations to implement on July 1
On April 15, Ministry of Finance ("MOF") published further clarifications oncross-boarder e-commerce channels ("CBEC") regulation, which requires thatonly "licensed" and "registered" nutritional products could be imported fromCBEC channel. The regulation will take effect from July 1, 2016. Meanwhile,MOF has also published a phase II positive list for the items that are feasiblefor CBEC channels (also refer to our note published on April 8, "Potentialimpact of new CBEC regulations").
What Biostime's nutritional products could be imported by CBEC then?
Among Swisse (Biostime nutritional subsidiary's) major product portfolios,three items - "vitamin", "Lecithin" and "fish oil" - appears on Phase I positivelist. Phase II positive list has mainly added two items for nutritional products -."coenzyme Q10" and "cod liver oil". We are still checking with industryexperts on whether actual implementation are difference from ourunderstanding, but if based on these five items, we estimated that less than20% of its T-mall sales are allowed to be sold through CBEC channels based onour sampling statistics in March.
Potential interruption to Swisse's China sales…
While we are still checking with industry experts, it is likely that its majorproducts could not be imported from CBEC channels before obtaining ChinaFDA license and registration. We think the MOF clarification also indicates thatgovernments are aligning the regulations for online and offline channel, and fordomestic manufactured and imported brands. This trend might impact Swisse'China sales in other channels.
… and potential impacts on Biostime's re-financing plan
To recap, Biostime's gearing ratio increased to 116% in Dec 2015 from netcash after acquiring Swisse. It has a bridging loan of US$450mn which is dueon Sep 30, 2016 and convertible loan of HK$2,659mn which is redeemablefrom Feb 2017. Biostime is in the process to renew these debts. We areconcerned that disruptions in Swisse sales might impact its re-financing plans.
Maintaining Sell
We expect there is downside risks to valuation given potential disruptions inChina sales in the near-term. Meanwhile, we are also concerned bysustainability of its high margin, the P&L impact from financial consolidation,and high gearing ratio. In addition, we do not expect infant formula business torecover in 2016. Maintain Sell. Key upside risk: reversal and loosening ofregulations.

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