Pharmaniaga gains in 9MFY18 from logistics, distribution
KUALA LUMPUR: Analysts commend Pharmaniaga Bhd (Pharmaniaga) for its higher revenue in the cumulative nine months of financial year 2018 (9MFY18)of RM1.78 billion was mainly due to the higher revenue contribution coming from its logistics and distribution (L&D) division.
MIDF Amanah Investment Bank Bhd (MIDF Research) saw that Pharmaniaga’s L&D segment revenue contribution rose by 9.7 per cent y-o-y mainly attributable to the stronger contributions from the concession business.
This was partially mitigated by a lower revenue from its Indonesian division which dipped by 6.3 per cent y-o-y in view of the depreciation of the Malaysian ringgit against the Indonesian rupiah.
Pharmaniaga recorded a jump in 9MFY18 earnings of 18.4 per cent y-o-y mainly driven by a lower operating expense. The fall in operating expenses of 3.9 per cent y-o-y was by the L&D division which reflects its efficiency in distributing pharmaceutical products to public hospitals in clinics in Malaysia.
This lead to higher profit margin of 2.1 per cent.
Meanwhile, Kenanga Investment Bank Bhd (Kenanga Research) saw that Pharmaniaga’s revenue rose so far this year due to increased orders from concession business and government hospitals.
To note, the stock has been derated on concerns of government reviewing all medical supplies concession agreements of which Pharmaniaga has a 10-year contract ending in November 2019.
“We are unsure of there new ability of the contract but Pharmaniaga has the track record, platform and systems in place for the distributions of medical supplies,” it said in a separate note.
“The Indonesian operations remain a key area of growth, while further progress is being made in the European Union as the Group seeks to expand its global presence.
“In tandem with this, the group is focused on implementing continuous cost optimisation measures across its operations. Over the longer term, we expect its manufacturing division to propel earnings growth.”
MIDF Research saw while it is still uncertain whether the new government will renew its contract, it took comfort that the management is now focusing on cost optimisation efforts.
“We expect that this will result in further cost savings and hence, could improve the group’s ability to offer a more competitive pricing to the government. In addition, the group will continue its focus on strengthening business synergies between its Indonesian subsidiaries to expand its presence in the Indonesian market.”