m3 stock presentation
TRANSCRIPT
M3, Inc. (2413:JP)
Medicine, Media and MetamorphosisChanging the World of Medicine Using the Internet
Some Abbreviations❖ MRs - “Medical Representatives” ❖ CSO - “Contract Sales Organization” contract marketing and sales
operations of pharmaceutical products and medical equipment to medical institutions.
❖ CRO - “Contract Research Organization” provides drug development services outsourced on a contract basis.
❖ SMO - “Site Management Organization” supports medical facilities in executing clinical trial.
What’s M3?❖ M3, Inc. supplies medical information services for doctors through Internet. The Company
also supports marketing of pharmaceutical companies and medical equipment manufacturers.
❖ Medical Portal segment - CSO, MRs➢ Medical-related company Marketing sector MR-kun, m3MT, m3.com➢ Survey sector➢ Other sector - QOL-kun services, business partner services and paid content services
❖ Evidence Solution segment - CRO and SMO❖ Overseas segment - CSO, MRs and research services.❖ Medical Treatment Platform segment - Development, distribution and support of electronic
medical records.
Apps for Smartphones and Tablets to provide information at any time and anywhere!
M3.com AppMedical News, Doctors community, Medical Conferences, Popular Medical articles.
MR. Kun AppLatest medical and drug information to help doctors with everyday practice.
Investment Thesis❖ Long term growth opportunity in healthcare business❖ Strong demands for M3’s Innovative products and services.❖ Growing overseas business.❖ Value creation via M&A.❖ Strong Sales and Earning growth.❖ It’s time to invest in Japan: Tactical Asset Allocation - BOJ’s QQE +
GPIF❖ Institutional Investors are accumulating shares❖ Compelling Trend following chart
Healthcare for long term?❖ Japan’s Older population (55+) ~ 39% of total population. ❖ Increasing Life Expectancy in Japan, China and the US.❖ Healthcare sector in Japan is enormous. Medical service and
peripheral business ~ 50 Trillions yens (~10%GDP). ❖ Sector controlled by only 290,000 physicians representing only 0.2%
of the national population.❖ Increasing health expenditure as %GDP in Japan and China (US
remain flat) - By 2035 healthcare’s shares of GDP ~2X according to McKinsey.
❖ Long term Growth opportunity for any healthcare related business.
Population Pyramid of Japan: A population pyramid illustrates the age and sex structure of a country's population and may provide insights about political and social stability, as well as economic development.
39% of Total Population
Investment Thesis❖ Long term growth opportunity in healthcare business❖ Strong demands for M3’s Innovative products and services.❖ Growing overseas business.❖ Value creation via M&A.❖ Strong Sales and Earning growth.❖ It’s time to invest in Japan: Tactical Asset Allocation - BOJ’s QQE +
GPIF❖ Institutional Investors are accumulating shares❖ Compelling Trend following chart
Strong demands for eDetails❖ Demand for eDetails is quite high for busy physicians that require
timely information at their convenience without the limitations imposed by their off-line MRs.
❖ Doctors spend the most time collecting information via the Internet. Conversely, pharmaceutical firms spend the majority of their budget on MR related costs. >> Not cost efficient for Pharma companies, Opportunity for M3’s MR-kun.
❖ Major clients are increasing usage of MR-kun. Average revenue from Top20 clients increase ~ 20% YoY.
What is the ideal ratio of on-line and off-line promotional information (“details”) from pharma companies?
Investment Thesis❖ Long term growth opportunity in healthcare business❖ Strong demands for M3’s Innovative products and services.❖ Growing overseas business.❖ Value creation via M&A.❖ Strong Sales and Earning growth.❖ It’s time to invest in Japan: Tactical Asset Allocation - BOJ’s QQE +
GPIF❖ Institutional Investors are accumulating shares❖ Compelling Trend following chart
China! we are coming for you.❖ M3 also expand their services into China (healthcare professional portal site
“Medlive.cn” ) via joint venture with Kingyee (Beijing) Co., Ltd❖ By utilizing M3’s proficiency in aggressive member recruitment, membership
exceeded one million medical professionals as of August 27, 2014.
Investment Thesis❖ Long term growth opportunity in healthcare business❖ Strong demands for M3’s Innovative products and services.❖ Growing overseas business.❖ Value creation via M&A.❖ Strong Sales and Earning growth.❖ It’s time to invest in Japan: Tactical Asset Allocation - BOJ’s QQE +
GPIF❖ Institutional Investors are accumulating shares❖ Compelling Trend following chart
Past Acquisitions for bright future
❖ Acquired Neues Co., Ltd., (one of the Largest SMO business in Japan) in 2014 which will help M3 to evolve as Japan’s Leading Comprehensive Clinical Trial Services Provider.
❖ Acquired Integrated Development Associates Co., Ltd. (provides consulting for Pan Asia drug development) in 2015 to streamline delivery of Drug R&D Services for Overseas Biopharmaceutical firms.
❖ Acquired MDJob Find Inc. (provides job placement services for physicians via operation of New England Physician Recruitment Center) in 2015 to further accelerate the growth of M3 Group’s physician job placement operations in the U.S.
Investment Thesis❖ Long term growth opportunity in healthcare business❖ Strong demands for M3’s Innovative products and services.❖ Growing overseas business.❖ Value creation via M&A.❖ Strong Sales and Earning growth.❖ It’s time to invest in Japan: Tactical Asset Allocation - BOJ’s QQE +
GPIF❖ Institutional Investors are accumulating shares❖ Compelling Trend following chart
Investment Thesis❖ Long term growth opportunity in healthcare business❖ Strong demands for M3’s Innovative products and services.❖ Growing overseas business.❖ Value creation via M&A.❖ Strong Sales and Earning growth.❖ It’s time to invest in Japan: Tactical Asset Allocation - BOJ’s QQE +
GPIF❖ Institutional Investors are accumulating shares❖ Compelling Trend following chart
Tactical Asset Allocation❖ Positive effect from BOJ’s massive Quantitative and Qualitative Easing
program (QQE) will drive equities market as we saw from US’s multiple QEs. Since the BOJ started their stimulus program, the Japan stock market has been in a good uptrend (sort of flat in 2014 due to multiple geopolitical risks and China slow down).
❖ Japan’s economy growth seems to be on track according to the latest BOJ’s minutes of monetary policy meeting, released on April 13th 2015.
❖ As one of oil importers, Japan will definitely benefit from decline in oil price.
TOPIX Weekly Chart from June 2012 to April 2015
Golden CrossGolden Cross
Oct 31, 2014 Announcement of Expansion of the QQETOPIX +4%
+19%
Tactical Asset Allocation❖ The Government Pension Investment Fund (GPIF) of Japan raised
domestic stock allocation from 12% to 25%. ❖ The World’s largest public pension fund remain “Bullish”.❖ Keep funds flowing into the market.
Investment Thesis❖ Long term growth opportunity in healthcare business❖ Strong demands for M3’s Innovative products and services.❖ Growing overseas business.❖ Value creation via M&A.❖ Strong Sales and Earning growth.❖ It’s time to invest in Japan: Tactical Asset Allocation - BOJ’s QQE +
GPIF❖ Institutional Investors are accumulating shares❖ Compelling Trend following chart
Institutional Investors Support❖ “Institutional Investors could drive stock price significantly”❖ 25.3% Shares of M3 owned by 171 Institutional Investors with 14 net
buyers lately (3 new positions, 31 increased positions). - Good institutional supports
RISKS for investing in TSE ❖ Failure of BOJ’s QQE. If they fail, it can be much worse than “the
Lost Decade”.❖ Currency RISK since JPY will be depreciated as a result of BOJ’s
QQE. LONG “YCS” as a currency hedge. ❖ “Language Barrier”
Most of Japanese companies will release their materials in both Japanese and English. However, it could take awhile until they put English version on their IR website. Use Bloomberg terminal or http://www.kaijinet.com/jpExpress/default.aspx
❖ M3, Inc. is definitely expensive by looking at its P/E ~ 80 only.❖ Since M3 is a growth stock in healthcare “technology” sector, hence
its high P/E should be justified as long as its earning keeps growing strong.
❖ How can we invest in “expensive” stock? Answer: “Trend Following” strategy
❖ “At the end of the day, your job is to buy what goes up and to sell what goes down.” - Paul Tudor Jones
Valuation?
Possible Price Target❖ MedPeer Inc (6095:JP) its competitor
is trading at P/E ~ 110❖ M3’s EPS ~ 28 with growth ~ 40% ex. Acquisition effect❖ PPT ~ 110*0.7*1.4*28 ~ 3000 Yen per share❖ Upside ~ 20% ❖ So Reward to Risk(at 8%) > 2:1 (Minimum upside for being
considered as a good trade is 16%)
Investment Thesis❖ Long term growth opportunity in healthcare business❖ Strong demands for M3’s Innovative products and services.❖ Growing overseas business.❖ Value creation via M&A.❖ Strong Sales and Earning growth.❖ It’s time to invest in Japan: Tactical Asset Allocation - BOJ’s QQE +
GPIF❖ Institutional Investors are accumulating shares❖ Compelling Trend following chart.
❖ Invest 50% of allocated capital when 1) Price breaches 50 days SMA resistance with strong volume (preferably > 50
days Average Volume).2) Price breaks out from new base with strong volume. 3) Pocket Pivot Buypoint - Up day with volume > prior sessions’ Volume
❖ Allocate 30% when price goes up 2.5% and 20%when price goes up another 2% (so we will buy within range of 5% from buypoint).“Pyramiding: Averaging UP not Averaging Down!”
❖ Unlike the US market, you have to buy a stock in a unit of Lot i.e. 1 Lot = 100 shares, 1000 shares. So it might be difficult to do pyramiding.
Trade Strategy
Trade Strategy❖ Hedge Currency Risk by Long YCS 50% of position size.❖ Consider take profit when return ~ 20%❖ MUST “CUTLOSS” if loss reaches 8% (Max. 10%)❖ Why CUTLOSS?
Position Sizing❖ Minimum allocated capital should be 10% of total
available fund. Otherwise position might be too small.❖ With 8% cutloss for 10% position size
then we only risk 8%*0.1 = 0.8% of portfolio
Position Sizing❖ Maximum position size? ❖ Define your maximum risk based on your risk
tolerance. Let 2% drawdown = Max for each position.Maximum position size = 2%/0.08 = 25%
❖ Good trade should yield Reward to Risk ≥ 2:1
“At the end of the day, the most important thing is how good are you at risk control.”
“If I have positions going against me, I get right out; if they are going for me, I keep them… Risk control is the most important thing in trading. If you have a losing position that is making you uncomfortable, the solution is very simple: Get out, because you can always get back in.”
Paul Tudor Jones
Q&A❖ More Information about M3 please visit
http://corporate.m3.com/en/❖ Learn more about Trend Following
Jesse Livermore’s booksInvestor's Business DailyStan Weinsteins' Stage Analysishttp://www.trendfollowing.com/resources/