This article first appeared in The Edge Malaysia Weekly on May 13, 2024 - May 19, 2024

Pharmaniaga Bhd (KL:PHARMA), the company that holds a dominant position in the supply of pharmaceutical products to government hospitals, is confident it will be nursed back to health by the end of this year.

But the external auditors remain cautious. In the latest audited report, they highlighted the group’s net loss of RM79 million for the year ended Dec 31, 2023; that its current liabilities exceed current assets; and the group’s capital deficiency of RM274.1 million.

The auditors concluded that the financials cast significant doubt over the company’s ability to remain as a going concern.

However, the group is confident that Phamaniaga will be back in the pink of health following a recapitalisation exercise comprising a rights issue of RM354.6 million and a private placement of RM300 million. However, the proposal has yet to receive Bursa Malaysia’s approval.

According to the company, the corporate exercise should be done by the fourth quarter of the year.

What is perplexing is that Phamarniaga’s plans to extricate itself from its financial woes are well known. The company has consistently detailed its regularisation plan, which it said has the backing of its major shareholders Boustead Holdings and the Armed Forces Fund Board (LTAT).

Considering that the regularisation plan is not a secret, surely the external auditors would have been briefed on the matter? Nevertheless, they have still expressed concerns, though perhaps they are merely being cautious.

In the meantime, it would help if Pharmaniaga could identify the parties taking up the private placement. If a reputable international pharmaceutical company takes up the block, market sentiment towards Pharmaniaga will change quickly.

Until then, don’t expect the air of caution to dissipate.

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