Pharmaniaga rebounds after a correction yesterday

KUALA LUMPUR (June 2): Pharmaniaga Bhd rebounded as much as 58 sen or 10.1% to RM6.32 this morning after a correction yesterday.

The counter, however, pared gains to RM5.98 at 10.14am, still up 24 sen or 4.18%.

The counter, which was the fifth top gainer this morning, saw 4.83 million shares traded.

Hong Leong Investment Bank (HLIB) Research analyst Gan Huan Wen in a note today downgraded Pharmaniaga to “hold” from “buy” as the share price had reached its fair value.

“We keep our target price (TP) of RM5.52 pegged at 21.5 times price-to-earnings (P/E) for FY22 (the financial year ending Dec 31, 2022) unchanged,” he said.

While Pharmaniaga has received a request to supply seven million doses of the Sinovac Covid-19 vaccine to government-linked companies and state governments, the analyst opined that this announcement came as no surprise given that Pharmaniaga had additional Sinovac vaccine supply which was not taken up yet.

According to Gan, Pharmaniaga has an expected supply pipeline of 24 million doses of the Sinovac vaccine (14 million from its fill-and-finished operations and 10 million finished doses) to distribute, with only 12 million promised to the Ministry of Health (MoH).

“As this announcement came as no surprise, our forecasts remain unchanged,” he said.

Meanwhile, based on his back-of-the-envelope calculations, he expects the fill-and-finish process of the 14 million doses to add about RM15.5 million at the group’s earnings before interest and tax (EBIT) level.

“While we have yet to factor in the financial impact of the additional 10 million finished doses ordered recently, we expect the earnings impact to be minimal as the nature of these will be purely trading. We reckon the margin will be razor-thin,” he added.

Source: TheEdgeMarkets