PETALING JAYA: The share price of Pharmaniaga Bhd added 34 sen in yesterday’s trading after a 14% increase in pretax profit for its first quarter.
The counter closed the day at RM2.22, up 18.09%.
A total of 5.86 million shares were done.
Some analysts were surprised with the better earnings, led by higher sales orders from Malaysian and Indonesian hospitals amid the Covid-19 pandemic.
Pharmaniaga reported a 14.1% increase in net profit to RM22.40mil for the first quarter ended March 31 compared with RM19.62mil a year earlier.
Hong Leong Investment Bank (HLIB) Research is raising its financial year 2020 (FY20)-FY21 earnings by 29%-23% to reflect higher revenue contribution from higher orders from the Health Ministry (MoH) and reduction in depreciation charges due to the reclassification of the MFRS16.
It changed the target price to RM2.92 from RM2.30. This is based on a price earnings (PE) target of 13 times tagged to the FY20 earnings per share.
HLIB Research said Pharmaniaga will continue to gain from the outbreak, being the sole concessionaire to the MoH as the orders for drugs and consumables increase.
CGS-CIMB Research is also positive on Pharmaniaga’s move to improve its manufacturing and non-concession business contributions, which yield better margins than its concession business.
A re-rating catalyst, CGS-CIMB said, would include better-than expected earnings and better clarity on its concession agreement (CA). The downside risks were lower-than-expected manufacturing segment earnings, and sharp reduction in CA profit margins.
The government has extended Pharmaniaga’s services to provide medicines and medical supplies to MoH facilities till end-FY21. It also will continue to provide logistics and distribution (L&D) services to MoH comprising 148 government hospitals and 1,700 clinics nationwide till end FY24.
Moving forward, MIDF Research said Pharmaniaga is at an advantage versus its peers in the L&D segment due to its extensive and well-established network nationwide. It has a positive delivery track record to Malaysian government hospitals and clinics.
This was critical during the current fight to curb the spread of Covid-19 nationwide. L&D will continue to be Pharmaniaga’s strong backbone while its manufacturing segment will propel the company’s growth going forward with a better product mix that will lift margins for the company.
MIDF Research is also positive on its Indonesian division’s growing contribution, as it continues to tap into the country’s 252 million strong population’s increasing need for quality healthcare products and services.
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