‘Underperform’ call on Pharmaniaga
KUALA LUMPUR: Pharmaniaga Bhd’s core net profit of RM27.5 million in the financial year ended Dec 31 last year came in at 50 per cent consensus due to lowerthan-expected concession demand, said Kenanga Research.
It said while Pharmaniaga’s top line rose two per cent in the fourth quarter of last year, it fell into the red with a pre-tax loss of RM13.5 million.
This was due largely to losses at both manufacturing and logistics segments as a result of higher operating expenses arising from urgent delivery required by hospitals amid the Covid-19 pandemic.
Correspondingly, its fourth quarter net loss came in at RM6.3 million compared to a net profit of RM1.4 million in the preceding quarter, which was negated by over-provision of tax liability.
Kenanga Research said Pharmaniaga had announced a fourth interim dividend of one sen, bringing the financial year 2020 dividend to 11 sen per share, in line with expectations.
It said Pharmaniaga had entered into an agreement for the purchase and distribution of Covid-19 vaccines developed by Sinovac Life Sciences Co Ltd.
The agreement is for the supply of 14 million doses to be carried out through the fill-and-finish activity.
The research firm said it was unclear at this stage as to the financial impact of such a venture, as the government would likely want to see it delivered in the most price-competitive manner possible.
“We highlight here that profitbefore-tax margin for the logistics and distribution segment is razor-thin, averaging at 0.2 per cent over the past 20 quarters.
“The recent run-up in its share price has rendered current valuations unattractive, which seems to have overpriced the positive near-term prospects.”
Furthermore, Kenanga Research said the stock lacked earnings visibility beyond the interim extended concession period from Dec 1, 2019 to Dec 31 this year.
It maintained the “underperform” call on the stock with a lower target price of RM2.50 from RM3.15 previously.