ON Monday (May 31), Pharmaniaga Bhd – out of the blue – soared sky high to close limit up RM1.51 or 29.84% at RM6.57 with a volume of 16.6 million shares.
But the price was not sustainable as the stock gave up 83 sen or 12.63% of its previous day’s gain yesterday (June 1) – despite hitting an intraday high of RM7.25 – in view of heavy profit taking activity to close at RM5.74.
The spike of Pharmaniaga’s stock price could be attributed to the profitable vaccine business considering that the manufacturing and distributor of pharmaceutical and medical products has received a request to supply seven million doses of the Sinovac COVID-19 vaccine to government-linked companies (four million) and state governments (three million).
As shared by Hong Leong Investment Bank (HLIB) Research, Pharmaniaga has an expected supply pipeline of 24 million doses of Sinovac vaccines (14 million from their fill and finished operations and 10 million finished doses) to distribute with only 12 million promised to the Health Ministry (MoH).
Based on its back of the envelope calculation, HLIB Research expects the fill and finish of 14 million doses to add circa RM15.5 mil at Pharmaniaga’s earnings before interest and taxes (EBIT) level.
“This is based on (i) purchase price of US$11 (RM44) per dose (given that Indonesia had purchased completed Sinovac vaccines for US$13.60/dose) (according to source); and (ii) EBIT margin of 2.5% based on three-year average logistics and distribution EBIT margin,” explained analyst Gan Huan Wen in a company update.
“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 minima; as the nature of these will be purely trading, we reckon the margins will be razor-thin.”
As the latest announcement comes as no surprise, HLIB Research’s forecast on Pharmaniaga have remained unchanged.
All-in-all, the research house downgraded Phramaniaga to “hold” (from “buy” previously) but retained its target price at RM5.52 pegged to 21.5 times price-to-earnings ratio (PE) on FY2022.
“We reckon its fair value has been reached. Note that the share price has surged 80.5% since April 2021,” added HLIB Research.
At 12 noon, Pharmaniaga was up 9 sen or 1.57% to RM5.83 with 6.28 million shares traded, thus valuing the company at RM1.53 bil (the stock has been traded between RM5.82 and RM6.32 thus far today). – June 2, 2021
