KUALA LUMPUR: Kenanga Research has maintained its market perform rating on Pharmaniaga
and target price of RM3.05 following the release of its quarterly results on Friday.
Kenanga said Pharmaniaga's 1H18 core profit after tax and minority interests (Patami) of RM33.9mil excluding the provision for and write-off of receivables and inventories came n within expectations.
"YoY, 1H18 revenue rose 6% due to increased orders from concession business and from government hospitals. Correspondingly, 1H18 core PATAMI rose 5.8% thanks to better performance from the Logistics and Distribution division.
"The Logistics and Distribution Division’s 1H18 PBT rose two-fold to RM9m mainly attributable to stronger contributions from concession business notwithstanding the impact from increased
operating expenses.
"The Manufacturing Division posted a PBT of RM34m (-0.7% YoY) due to lower orders under the concession business. Meanwhile, the Indonesia Division's PBT was flat at RM1m mainly due to the depreciation of the Malaysian Ringgit against the Indonesian Rupiah and increased finance costs."
The research house noted that the stock has been de-rated on concerns of government reviewing all medical supplies concession agreements of which Pharmaniaga has a 10-year contract ending in November 2019.
"We are unsure of the renewability of the contract but Pharmaniaga has the track record, platform and systems in place for the distributions of medical supplies," it said.
It said the Indonesian operations remains a key area of growth while further progress is being made in the EU in expanding its global presence.
Kenanga expects the manufacturing division to propel earnings growth.
"The group aims to add about 200 new products over the next 10 years to its existing portfolio of around 500 products, which should boost demand for its products and lift earnings."
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