Healthy outlook for Duopharma Biotech

UOB Kay Hian Research maintains a “hold’’ on Duopharma Biotech with a TP of RM3.15 a share.

PETALING JAYA: With renewed contracts and the potential vaccine deal, Duopharma Biotech Bhd (DBB) is said to be looking attractive, more so as demand for health care services rise amid the Covid-19 pandemic.

The company on Monday even offered a one-for-three bonus issue to reward shareholders after a better financial showing in its first quarter results.

Looking ahead, analysts are confident the group’s financial performance will improve as it continues to keep costs under its lid.

CGS-CIMB Research, while keeping its earnings forecast for unchanged, has upgraded its call for DBB stock from a “hold’’ to an “add.’’

“We think the current valuations look attractive after its recent share price weakness.

“Our target price (TP) is based on the current year 2022 price to earnings ratio of 28.8 times, the research house said.

That is after taking into account potential long-term earnings prospects from the development of vaccine manufacturing capabilities, which is a key re-rating catalyst, it said.

It believed that DBB proposed one-for-three bonus issue could improve liquidity for the stock.

However, the downside risks it cited include weaker-than-expected earnings contribution from the Covid-19 vaccine and lower-than-expected domestic and export pharmaceutical demand.

TA Securities Research said DBB’s management is confident that the group will achieve satisfactory results in 2021 due to higher budgetary allocation for the healthcare industry, which surged 4.2% to RM31.9bil.

This will bode well for the group as about 50% of its sales comes from the public sector, the research house said.

TA is of the view that said DBB’s share price has appreciated 87.8% over the past 12 months. This has been largely priced in its 2021 financial results and favourable outlook.

It maintains a “sell’’ on the stock at an unchanged TP of RM2.54 per share.

UOB Kay Hian Research maintains a “hold’’ on the stock with a TP of RM3.15 a share.

It said the first quarter 2021 net profit of RM13.6mil (+12.7% quarter-on-quarter, -6.2% year-on-year) was in line with its expectations but above consensus forecast.

The research house expects earnings contribution to improve sequentially.

However, it pointed out possible delays in obtaining regulatory approval and other corporate developments, which it said have placed uncertainties over DBB’s role in the fill-and-finish and distribution of the Sputnik V vaccine.

At the same time, it adds “we are assured of its contingency plans.’’

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