Fosun Buys 5% Stake in Tongjitang

Fosun Enterprises (HK) Ltd., a subsidiary of the company, bought 1.8 million ADS (American Depository Shares) of Tongjitang Chinese Medicines Co., Ltd., equal to 7.26 million common shares through the New York Stock Exchange for USD 7.4 million. Fosun now holds about 5.37% of total shares outstanding of Tongjitang.

Analysts comment that Fosun's intention to go bottom fishing is obvious by purchasing shares of Tongjitang at roughly USD 4.00 per share, compared to its USD 10.00 IPO price.

Following Tongjitang's listing on NYSE in March 2007, it has seen a string of falls. It was traded at about USD 2.50 per ADS during the period between 21 Aug and 15 Oct 2008, when Fosun was purchasing its shares.

"Our company is being severely undervalued and the stock price carries a false reflection of its true value," Zhang Xuyang, a member of the Investor Relations Department of Tongjitang, said adding that, "there are misunderstandings among American investors about Tongjiang's business model."

"Traditional Chinese medicine enterprises in mature capital markets usually enjoy a P/E ratio of about 10. For companies that choose to be listed on the NYSE, they must abide by rules and regulations of the overseas market," Li Yingpeng, medical sector analyst at Yinhe Securities, said.

"We believe that it is the right moment for investing," said the head of the Securities Department, who denied comment on whether he plans for the acquisition to be a long-term holding or short-term investment.

According to Li Yingpeng, the company only makes long-term investments in medical enterprises with a defined competitive edge, either via merger & acquisition, or as affiliates. These investments are aimed at developing the overall industrial chain of the group. It also makes short-term PE investments with the purpose of achieving investment returns. The former is a strategy while the latter is a tactic.

"Judging from the scale and possible improvement of the group's industrial chain, the company's acquisition of Tongjitang Chinese Medicines is meant for short-term PE investment," said Li Yingpeng.


Source: NATIONAL BUSINESS DAILY

Date: 24 0ct 2008

CN01/DC/RL/LZ/NK/KM