KUALA LUMPUR (July 13): Pharmaniaga Bhd closed unchanged at 38.5 sen a share on Thursday (July 13) amid active trading, after the pharmaceutical company announced that the government had renewed its concession to provide medical supply logistics services for another seven years.
The counter finished the day with 23.11 million shares changing hands. Earlier in the morning, it was the eighth most traded stock on the local bourse, when 18.89 million shares were transacted.
The stock rose as much as 7.79% or three sen to an intraday high of 41.5 sen, before paring gains. At the closing share price of 38.5 sen, its market capitalisation stood at RM497.42 million.
On Wednesday, Pharmaniaga announced that its wholly owned unit Pharmaniaga Logistics Sdn Bhd (PLSB) had received a seven-year extension for the provision of medicines and medical supplies from the Ministry of Health (MOH) via a letter on the same day, which took effect from July 1, 2023, and will last until June 30, 2030.
While the MOH and PLSB finalise the terms of the agreement, PLSB will continue to provide its services based on the agreed salient terms, said Pharmaniaga.
The counter fell into Practice Note 17 status in February after announcing a half-a-billion ringgit impairment for its unused and expired stock of Covid-19 vaccines, which dragged it into its largest-ever net quarterly loss of RM664.39 million for the fourth quarter ended Dec 31, 2022 (4QFY2022).
The recently delisted Boustead Holdings Bhd is its largest shareholder with a 52% stake.
Lembaga Tabung Angkatan Tentera (LTAT) in turn holds 97.63% of Boustead after privatising the group as part of its financial restructuring efforts. LTAT also has an 8.6% direct stake in Pharmaniaga.
In a note on Thursday, Kenanga Research analyst Raymond Choo said he found the latest development positive and in line with market expectations.
He said Pharmaniaga is expected to implement the Pharmacy Information System and Clinic Pharmacy System maintenance, licence renewal, change request and system implementation at the new facilities, based on existing operating cost rates.
"However, we are mindful that the government will likely want to see better value for money, and hence Pharmaniaga will have to offer new rates that are more competitive (of which we have reflected in our forecasts).
"We project pedestrian earnings growth in FY2023 at levels similar to pre-Covid, averaging RM40 million to RM60 million, driven by regular orders for medical supplies from the MOH concession," he said, maintaining the "underperform" rating and target price of 33 sen for the stock — which works out to nine times FY2024 forecast earnings per share and a 35% discount to its peers' average on account of its smaller market capitalisation.
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