Pharmaniaga shares fall after registering first loss since 1999
KUCHING: Shares in Pharmaniaga Bhd (Pharmaniaga) fell yesterday after the group reported a net loss of RM149.22 million for financial year ending December 31, 2019 (FY19) – its first loss since its listing back in 1999.
The shares dropped by 14 sen or 6.86 per cent to close at RM2.04 per share yesterday.
Nevertheless, analysts believe the group will record better earnings in the subsequent quarters, backed by the extension of its services to the Ministry of Health (MoH).
In November 2019, the government had extended Pharmaniaga’s services for the provision of medicines and medical supplies to MoH facilities to the end of FY21 and provided them with a new contract to continue providing logistics and distribution services for MoH to over 148 government hospitals and 1,700 clinics nationwide until the end of FY24.
In a report, MIDF Amanah Investment Bank Bhd’s research team (MIDF Research) said with the new contract arrangement, the group was significantly impacted by the recognition of the remaining unamortised PhIS of RM247 million which caused the group to report a loss in 4QFY19.
“Moving forward, we expect strong sales growth from concession and non-concession businesses will contribute to an improvement in Pharmaniaga’s earnings and cash position going forward,” it added.
On Pharmaniaga’s fourth quarter of the financial year 2019 (4QFY19) performance, the research team noted that Pharmaniaga reported solid 4QFY19 sales growth of 20 per cent y-o-y to RM715.7 million which was in line with the growth of logistics and distribution (L&D) division.
“During the quarter, revenue for the division grew by 23.8 per cent y-o-y to RM508.2 million driven by the stronger demand from the concession and nonconcession businesses,” it said.
Following the new contract awarded by MoH, it noted that Pharmaniaga has to revise the useful life of rights to supply.
“The rights to supply are expenses incurred for Pharmacy Information System (PhIS), being part and parcel of the ordinary contractual obligations under the Concession Agreement.
“With the new contract arrangement, the remaining unamortised rights to supply amounting to RM247 million has been fully recognised during the quarter,” it added.
The research team also noted that Pharmaniaga’s operating cash flow had turned positive at RM188.8 million at the end of 4QFY19 (from RM82.8 million at the end of 4QFY18) due to the higher sales recorded and improved collection.
“The additional cash were used to pared down debt by RM81.4 million or 12.2 per cent yo-y decline,” it said.