Re: Pharmaniaga
Posted: Wed Apr 17, 2019 9:35 am
not vested
Trading Buy: PHARMA - 7081
(Last price: RM2.02, Potential upside +26.7%)
Company Profile
Pharmaniaga is the sole concessionaire to the Ministry of Health (MoH) of Malaysia.
Trading Catalyst
PHARMA slid 52% post GE14 due to worries of a non-renewal of the 10Y concession agreement (ending end Nov 2019) as the group is viewed to be having monopolistic position.
We remain optimistic that PHARMA would still able to clinch the contract (albeit with modifications) premised on:
(i) impeccable track record in L&D following huge amount of investment in its supply chain management to ensure efficient deliveries to public hospitals and clinics;
(ii) the unattractive thin margins (~1.0-2.0%) from the concession business will discourage participation from other distributors due to high barriers of entry;
(iii) highly unlikely that with PH’s financial position would undertake huge investments to emulate PHARMA’s model to ensure operational effectiveness and timely deliveries;
(iv) increasing non-concession contributions from Indonesia’s market due to huge population over 270m people
(v) attractive risk-reward profile at 9.6x FY19E P/E and 1.2x P/B, which are 37% and 38% lower compared to its peers, supported by an attractive FY19-20 DYs of 7.4%.
Technical View
Resistance: RM2.13 / RM2.24 / RM2.56
Support: RM1.93 / RM1.86
Cut loss: RM1.83
Key Financial Stats
Trading at 9.6x FY19E P/E and 1.2x P/B (37% and 38% below its peers), respectively.
Source: HLIB
Trading Buy: PHARMA - 7081
(Last price: RM2.02, Potential upside +26.7%)
Company Profile
Pharmaniaga is the sole concessionaire to the Ministry of Health (MoH) of Malaysia.
Trading Catalyst
PHARMA slid 52% post GE14 due to worries of a non-renewal of the 10Y concession agreement (ending end Nov 2019) as the group is viewed to be having monopolistic position.
We remain optimistic that PHARMA would still able to clinch the contract (albeit with modifications) premised on:
(i) impeccable track record in L&D following huge amount of investment in its supply chain management to ensure efficient deliveries to public hospitals and clinics;
(ii) the unattractive thin margins (~1.0-2.0%) from the concession business will discourage participation from other distributors due to high barriers of entry;
(iii) highly unlikely that with PH’s financial position would undertake huge investments to emulate PHARMA’s model to ensure operational effectiveness and timely deliveries;
(iv) increasing non-concession contributions from Indonesia’s market due to huge population over 270m people
(v) attractive risk-reward profile at 9.6x FY19E P/E and 1.2x P/B, which are 37% and 38% lower compared to its peers, supported by an attractive FY19-20 DYs of 7.4%.
Technical View
Resistance: RM2.13 / RM2.24 / RM2.56
Support: RM1.93 / RM1.86
Cut loss: RM1.83
Key Financial Stats
Trading at 9.6x FY19E P/E and 1.2x P/B (37% and 38% below its peers), respectively.
Source: HLIB