Analysts at PhillipCapital and SAC Capital have kept their “buy” calls on pharmaceutical company, Hyphens Pharma, at unchanged target prices of 35 cents and 38 cents respectively.
For the 1HFY2024 ended June 30, Hyphens Pharma’s revenue came in 33.4% y-o-y higher to $99.6 million, while profit after tax and minority interests (patmi) grew 52% y-o-y to $5.4 million.
To PhillipCapital’s Paul Chew, Hyphens Pharma’s results met expectations, with revenue and patmi reaching 55% and 46% of his forecasts respectively.
“Earnings growth was driven by restocking in specialty pharma as supply chains normalise, new products and expansion of the distribution network,” Chew notes in his Aug 21 report.
Hyphens Pharma’s especially pharma earnings before interest, taxes, depreciation and amortisation (ebitda) doubled to $7.9 million after the supply disruption in the previous year, with revenue from Vietnam increasing by 61% y-o-y to $31.8 million. The country’s revenue was largely due to specialty pharma sales to hospitals.
“Customers have essentially re-stocked following the shortages a year ago,” Chew writes.
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On the other hand, the company’s bottomline was dragged by a $700,000 loss in medical hypermart earnings. “Hyphens is investing in the enhancement and geographic expansion of the DocMed platform,” the analyst says, calling it an “investment pain”.
That said, while these investments in enhancing and regionalising the platform are dragging the medical hypermart segment into losses, Chew says he does not expect losses to widen in the 2HFY2024.
In his outlook, he sees Hyphens’ proprietary brands and specialty products as foundations for its future growth.
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Within the company’s proprietary brands, its two key products of Ceradan and Ocean Health look to grow. Ceradan is now available at over-the-counter pharmacies in Singapore, Malaysia and Vietnam, and is beginning to expand into the Middle East.
Ocean Health supplements on the other hand have grown through product extension into gummies, reaching a younger customer base, and distribution points have also widened in traditional and non-traditional convenience stores such as 7-11.
“Apart from its contribution to sales, such product placement builds brand equity. E-commerce is another growth distribution channel for proprietary brands,” writes Chew.
On Hyphens’ speciality products, the analyst sees Vietnam as a growth market as healthcare spending and private healthcare rises in the country, leading to opportunities for greater pricing power.
He adds: “The secular growth opportunity is to introduce and register more specialty products that can leverage on their established distribution network in the region. Some new products include Winlevi, Byfavo, Wynzora and Amenalief. New products require 18 to 24 months for product registration.”
Meanwhile, SAC Capital’s Daniel Ng and Matthias Chan have lowered their full-year gross profit forecasts, as Hyphens Pharma faces potential cost pressures and margin erosion due to the depreciation of Asean currencies against the Singapore dollar.
Conversely, operating expenses in the 1HFY2024 fared better than they anticipated.
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They write: “Consequently, we have revised our operating expense assumptions downwards in our model to reflect the improved efficiency in cost management.”
As such, Ng and Chan have raised their FY2024 net profit forecast by 14% to $10.2 million, reflecting the lower operating expenses observed in 1HFY2024, while also lifting their FY2025 net profit forecast by 16% to $10.9 million.
The analysts conclude: “Looking ahead, we expect the stabilisation of the regional currencies vis-à-vis the US dollar and Euro.”
As at 11.55 am, shares in Hyphens Pharma are trading flat at 28.5 cents.
