BioAlpha
KUALA LUMPUR: Bioalpha Holdings Bhd
plans to increase the production of its pharmaceutical products and also open more “Constant” pharmacies across the country.
CIMB Equities Research said it was positive on the plans and maintained its earnings per share (EPS) forecasts and target price of 44 sen (last traded price 24 sen).
“This is based on an unchanged 20 times FY19F P/E, at a 20% discount to our 25 times consumer sector target P/E for 2019F. The stock remains an Add.
“A potential catalyst is strong, sustained domestic revenue growth. A downside risk is export revenue remaining weak,” it said.
CIMB Research said on Oct 5, it arranged for seven fund managers to meet BioAlpha’s managing director William Hon and CFO Goh Siow Cheng.
It said during the meetings, the fund managers focused on BioAlpha’s proposed acquisition of a majority stake in North West Enterprise Sdn Bhd (NWE, Unlisted).
NWE manufactures, trades and supplies hotel amenities and personal care products to major hotels in the country.
“The due diligence process on NWE is ongoing. BioAlpha likes NWE’s distribution business that caters to the major hotels across the country and the company believes it could sell in its own-brand products (Tongkat Ali and Kacip Fatimah teas) to tourists staying at these hotels,” it said.
NWE also has a personal care product division, which BioAlpha lacks. In CIMB Research’s view, BioAlpha could launch its own personal care products with NWE under its umbrella.
“BioAlpha intends to open more ‘Constant’ pharmacies across the country in 2019F. The company now has 20 pharmacies (eight self-owned and the remaining 12 held by
franchisees).
“The company is looking to launch 16 new Constant pharmacies nationwide by end-2019F. If successful, we think this would be positive for sales of its own brands, which would be stocked by the Constant pharmacies.
The research house also noted that as BioAlpha’s factory was operating at 80% utilisation rate, BioAlpha building a new factory in Pasir Raja, Terengganu and upgrading its main factory in Bangi.
When combined, the new and also upgraded plants could boost group production capacity by 50% at end-1Q19F and cater to the expected strong domestic orders in future.
BioAlpha expects its 300-acre herbal park in Desaru to be fully planted by end-2018F and the research house expects the park to be profitable in 2019F onwards.
“For 2019F, BioAlpha targets to produce 1,000 tonnes of herbs and plants from the Desaru and Pasir Raja herbal parks,” it said.
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