CIMB Research positive on YSP Southeast Asia, TP RM3.46

KUALA LUMPUR: CIMB Equities Research remains positive on YSP Southeast Asia Holdings Bhd’s operations and growth prospects and it is maintaining its target price of RM3.46.

It said on Wednesday YSP won more tenders during last year’s Ministry of Health (MOH) tender cycle to supply drugs to government healthcare facilities. 

“We believe this could boost sales from hospital segment (MOH & private) beyond 18% of total revenue (FY17). The potential liberalisation of MOH’s procurement process and/or an increase in MOH budget will also be catalysts for YSP in winning more tenders,” it said.

CIMB Research said  based on its estimates, YSP sales to MOH currently make up less than 1% of MOH’s drug budget (RM4bil).

YSP is targeting to grow its export sales from 71:29 local export ratio currently to a balanced mix of 50:50 local export ratio. 

It said YSP is present in more than 20 countries, with its focus on emerging markets with large populations in Asean and the African region. YSP plans to register more products in each of its export markets as well as participate in more overseas tenders, especially government ones.

“YSP indicated that it is constructing a new research and development (R&D) lab in Bangi, Selangor. 

“With the new lab (RM3mil capex) slated for completion by end-4Q18, YSP aims to increase its R&D activities, which could allow it to develop and register more generic drugs for local and overseas markets,” it said. 

CIMB Research said although YSP does not plan to build a new production plant in Malaysia, it is making an effort to automate its production lines. This should lead to higher production capacity and improvement in overall efficiency.

As expected, its Vietnam plant that produces animal drugs should still be loss-making in FY18F due to lower demand for animal health drugs. This plant’s losses should not widen vs. FY17 as YSP plans to produce more products there. 

For its Indonesia plant, YSP obtained cGMP certification from Indonesia’ National Agency of Drug and Food Control in mid-2017. 

“We gather that YSP has started drug production but mainly for product registration purposes. We only expect commercial production to begin in FY20F,” it said.