WHILE the various COVID-19 vaccines can boost human immunity to a large extent, this may not necessary translate into lucrative earnings – or rather a share price booster – as Duopharma Biotech Bhd would wish them to be.
Last Friday, Duopharma announced that the group has been granted conditional registration approval by the Drug Control Authority (DCA) for Sinopharm COVID-19 vaccine developed by China National Biotec Group Co Ltd.
However, the Coordinating Minister for the immunisation programme Khairy Jamaluddin said that the Sinopharm vaccine is “only for the private market for now”.
Having said that, Khairy mentioned that the Government can also procure Sinopharm vaccines from Duopharma if Malaysia does not have enough supply for the national immunisation programme (PICK).
“We are mildly positive on the news and expect the earnings contribution to be marginal in the short run,” opined TA Securities Research analyst Tan Kong Jin in a company update.
“Although Sinopharm vaccine will be a new earnings stream for the group, the demand from the private sector or Malaysian citizens is highly uncertain as the current vaccination program provides free vaccination for Malaysians above 12 years old.”
What this means is that individuals/companies would purchase Sinopharm vaccines from the private sector if (i) small and medium enterprises (SMEs) register and pay for their employees, especially undocumented workers; (ii) fully vaccinated people require additional boosters; (iii) Sinopharm vaccines are safe for kids below 12 years old (with the Government not providing free vaccines to this age group in the future).
“Over the long run, the Sinopharm vaccine could be an earnings booster to Duopharma if (i) WHO (World Health Organization) confirms the need for individuals to get COVID-19 vaccines every year; and (ii) the Malaysian Government no longer provides free vaccines to the rakyat after achieving the herd immunity,” rationalised TA Securities Research.
Assuming Duopharma sells one million doses of its Sinopharm vaccine to the private sector at RM150 each, this will boost the research house’s FY2021 revenue projection by RM150 mil.
“In terms of profit, we expect the potential earnings contribution to be at circa RM7.5 mil for 2021 (assuming net profit margin of 5%),” projected TA Securities Research. “Note that under the Selangor Vaccination Programme (SelVAX), the cost is RM350 for the two doses per person.”
All-in-all, although the research house raised its target price of Duopharma to RM2.82 (from RM2.60 previously) after raising its PE (price-to-earnings) multiple to 26 times from (from 24 times previously) to factor in potential contribution from the Sinopharm vaccine, it reiterated its “sell” rating due to stock’s pricey valuations.
At 11.39am, Duopharma was down 6 sen or 2.01% to RM2.92 with 836,700 shares traded, thus valuing the company at RM2.06 bil. – July 19, 2021
