Tianjin Zhongxin Pharm Group

[Squirrel]

The IFA analysis actually shows how undervalued the shares are trading at.

https://links.sgx.com/FileOpen/16%2006%2...eID=657864

Having regard to the considerations set out in this Letter, the information available to us as at the Latest Practicable Date and subject to the assumptions and qualifications set out in this Letter, we are of the opinion that the terms of the S Shares Chain Offer are NOT FAIR and NOT REASONABLE from a financial point of view based on the following key factors:

Extracted from the document.

Estimated range of values for each S Share

Having considered Sections 7.1 to 7.7 of this Letter, the P/E and EV/EBITDA multiple valuation is our primary valuation methodology taking into consideration the nature of the Group's core business as well as the Group being profitable for the latest three financial years and its ability to continue as a going concern.

Applying the mean P/E and EV/EBITDA multiples of the Selected Comparable Companies to the Group's earnings of RMB661.7 million and EBITDA of RMB856.0 million for FY2020 and taking into account the net cash of the Group of RMB1,954.6 million and non-controlling interest of the Group of RMB141.5 million as at 31 December 2020, the estimated range of values is between USD2.091 to USD2.617 per S Share. We note that the S Shares Offer Price of USD0.894 is below the estimated range of values.

We have also considered the asset-based approach to show the extent to which the value of each S Share is backed by both tangible and intangible assets, assuming the hypothetical sale of all assets of the Group over a reasonable period of time. However, the asset-based approach does not take into account the future earning prospects of the Group and the Group is not an asset heavy company such as investment / real estate holding companies or property developers. The Group's non-current assets are primarily property, plant and equipment which are used in the operation of the business and that it is their intention to continue using them in its current business. Nevertheless, the asset-based approach serves as a meaningful reference point for comparison with the S Shares Offer Price against the Company's NAV per share. We note that the S Shares Offer Price represents a discount of approximately 22.4% and 22.2% to the audited NAV per Share and NTA per Share respectively. We also note that the P/NAV ratio of 0.8 times implied by the S Shares Offer Price is below the mean of the P/NAV ratios of the Selected Comparable Companies of 2.5 times and the mean of the P/NAV ratios of the Selected Comparable Transactions of 1.5 times.