MIDF Upgrades Pharmaniaga To A Trading Buy

Malaysian Industrial Development Finance Research (MIDF) has upgraded Pharmaniaga Bhd to a trading buy from neutral with a target price revised at RM0.98. It expects a total return of 11.3%.

MIDF said that a wholly-owned, high-tech subsidiary of Pharmaniaga Bhd,  Pharmaniaga Lifescience Sdn Bhd (PLS), and Ministry of Health (MOH) has upgraded the pace of the national vaccination rollout; increasing the percentage of the vaccinated population under Sinovac from 18% to 28%.

The research house said that the additional 6 million doses of Sinovac vaccines for NIP also had proven that Sinovac continues to be in demand and accepted as one of the brands effectively utilised to fight against and subsequently decrease ICU admissions for Covid-19 infections.

PLS had recently signed and secured an acceptance letter with the Malaysian Ministry of Health (MoH) to purchase an additional 6 million doses of Sinovac Covid-19 vaccines, making the total vaccination supply by Pharmaniaga to NIP at 18 million doses.

MIDF believes that the fill-finish production and sales of the Sinovac Covid-19 vaccines will contribute marginally to the group’s earnings, and will improve valuation levels for the group in the near future. TP is now derived via pegging FY22F EPS of 6.5sen to a target PER of 15.0x which is the average of its historical five year rolling PER.

On additional procurements, MIDF said that it will positively impact Pharmaniaga’s FY21F earnings, under the condition that the new vaccine supply comes from its fill-finish operation, as it holds more weight to the group’s earnings.

It said that based on the current purchase price of  Sinovac  vaccines in Indonesia (approximately RM60 per dose at Indonesia’s vaccine ceiling price), it expressed the opinion that the additional 6 million fill-finish vaccines produced by PLS could add about RM300 million in future revenue.

MIDF stated that Pharmaniaga is expecting better financial performance in 2HFY21, with the continuous boost of Sinovac vaccine supplies to NIP and future sales of vaccines to the private sector, GLCs and state governments, consequently contributing to widespread vaccination at national levels and socio-economic recovery from the impact of Covid-19 pandemic.

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