Analysts observed that Pharmaniaga lacks earnings growth visibility due to uncertainty of sustainability of vaccine-driven earnings growth and despite factoring in concession extension beyond December 2021 to supply medicine and medical supplies for procurement of drugs. — Bernama photo
KUCHING: Pharmaniaga Bhd (Pharmaniaga) lacks earnings growth visibility due to uncertainty of sustainability of vaccine-driven earnings growth, analysts opine.
The research arm of Kenanga Investment Bank Bhd (Kenanga Research) recapped that the group has successfully delivered the last batch of the Covid-19 vaccine supply totalling 12.4 million doses to the government on July 21, 2021.
“In addition, the group has also supplied additional two million doses to the government at the end of July 2021,” Kenanga Research noted.
The research arm recalled that in August 2021 the group was awarded a combined contract purchase of additional six million doses of fill-and-finish and imported finished product of Covid-19 vaccine to supply to the government.
“The group’s balance sheet for the latest quarter revealed a higher receivable amount due to sales of Covid-19 vaccines to the government, with collections received in July 2021 of approximately RM320 million.
“In addition, higher receivables were also due to advanced payment made to the supplier on purchase of Covid-19 vaccines of close to RM120 million and sales of leukaemia drugs to the government around RM90 million.”
As such, Kenanga Research highlighted that the Sinovac vaccine distribution is expected to impact from the second half of financial year 2021 (2HFY21) onwards but it is unclear at this stage as to the profit impact, mindful that the government will likely want to see it delivered in the most price-competitive manner possible.
“The stock lacks earnings growth visibility due to uncertainty of sustainability of vaccine-driven earnings growth and despite factoring in concession extension beyond December 2021 to supply medicine and medical supplies for procurement of drugs, the stock is trading at rich valuation at 18-fold and 21-fold FY21E and FY22E earnings, respectively.”