KUALA LUMPUR: Pharmaniaga Bhd emerged as the top gainer on Bursa Malaysia, rising over 9.7% in early trade Monday after the company obtained a 25-month interim extension for its concession.
The integrated pharmaceutical group rose 9.73%, or 22 sen to RM2.48. Early this month, the counter shed 3.62% to RM2.13. The stock closed down 11.6% on Oct 31 after the Government announced that its concession will end on Nov 30.
The Government has agreed to provide a 25-month interim period for procurement of drugs to Pharmaniaga after its concession ends on Nov 30, said Health Minister Datuk Seri Dr Dzulkefly Ahmad.
He said the interim period from Dec 1,2019 to Dec 31,2021 was to ensure that there was no supply chain disruption in the supply and distribution of medicines to the Health Ministry's facilities nationwide.
Dr Dzulkefly said the 25-month period would also allow the Health Ministry to make the necessary preparations to undertake the services which were done previously by Pharmaniaga, whose concession was said to be a monopoly.
Kenanga Research said it was “positively surprised” by the short-term reprieve for Pharmaniaga.
Still, it said beyond FY21, the future looked uncertain considering that the concession accounts for an estimated 50% of the group’s revenue.
“Upgrade back our FY20E net profit forecast by 40% as we reinstate revenue from the concession.
“However, target price is raised from RM1.60 to RM1.85 based on lowered 9x FY20E EPS (from previously 11.5x) which is at -2.0SD below 5-year historical forward mean due to the cloudy earnings visibility beyond FY21. Reiterate underperform, ” Kenanga said.
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