Hyphens Pharma International
Price target:
CGS International ‘add’ 40 cents
‘Healthy pipeline’ of new products
Hyphens Pharma International has a “healthy pipeline” of products to support patmi growth ahead, says CGS International (CGSI) analyst Tay Wee Kuang.
“Hyphens Pharma’s positive revenue momentum was a confluence of organic growth from new products and stock-keeping units launched across its speciality pharmaceuticals and proprietary brands portfolio over time,” writes Tay in a Sept 11 note.
The CGSI analyst calls attention to Hyphens Pharma’s pipeline of products undergoing registration across its operating regions, which already enjoy “sizeable” sales in existing markets. “We see greater potential for Hyphens Pharma to grow its revenue after the products are launched. Management has shared that product registration typically takes 12 to 24 months, depending on the country and type of product.”
Hence, Tay is staying “add” on Hyphens Pharma with a higher target price of 40 cents from 35 cents previously. “We believe Hyphens Pharma will be able to grow its patmi alongside sustained revenue growth. As such, we raise our FY2024–FY2026 EPS by 12.8% to 13.8%, with revenue growth partially offset by margin compression.”
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Record 1HFY2024
On Aug 14, Hyphens Pharma reported record first-half revenue of $99.6 million for 1HFY2024 ended June 30, up 33.4% y-o-y and 3.9% h-o-h, with the easing of supply chain disruptions from 1HFY2023.
1HFY2024 net profit was ahead at 56.5% of CGSI’s FY2024 forecast due to better cost control from lower advertising and promotional expenses, which offset gross profit margin compression of 2.6 percentage points (ppts) y-o-y and 0.4 ppts h-o-h.
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As a result, Hyphens Pharma’s 1HFY2024 net profit margin of 5.9% improved by 1.2 ppts y-o-y and 0.6 ppts h-o-h.
Gross profit compression resulted from key currencies of products from its pharmaceutical principals — the US dollar and euro — appreciating against key currencies of markets that Hyphens Pharma is selling to — the Vietnamese dong and Malaysian ringgit.
Vietnam and Malaysia combined contributed 44.9% of its revenue for 1HFY2024. The depreciation of the two currencies has also led to continued currency translation losses since 1HFY2022, notes Tay. “We think that the consolidation of its medical aesthetics business, Ardence Pharma, as a subsidiary in 1HFY2024 from an associate previously, also contributed positively to revenue and patmi.”
Tay notes that Hyphens Pharma had a free cash outflow of $0.85 million as at 1HFY2024, predominantly due to higher inventory levels of $34.6 million, up from $25.5 million in FY2023, to mitigate potential supply chain disruptions. Hyphens Pharma also had higher trade receivables of $46.8 million, up from $41.1 million in FY2023.
Re-rating catalysts include gross profit margin expansion from the appreciation of the Vietnamese dong and Malaysian ringgit against the US dollar and euro, and potential price increases. — Jovi Ho
Mapletree Pan Asia Commercial Trust
Price target:
DBS Group Research ‘buy’ $1.75
One of the ‘top beneficiaries’ of interest rate cuts
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DBS Group Research analysts Derek Tan and Geraldine Wong are maintaining their “buy” call on Mapletree Pan Asia Commercial Trust N2IU (MPACT) and a target price of $1.75. The analysts’ target price implies a P/B of 1.0 times, which is “fair” given the REIT’s dominant assets in Singapore. The unchanged target price also reflects a 24% upside to the REIT’s traded price of $1.41 as at Sept 9.
Tan and Wong note that MPACT is an undervalued quality Singapore-REIT (S-REIT) with yields greater than 6.0%. With a “value” play at 0.8 times P/B, it has a 1% higher yield pick-up than larger cap S-REITs. Furthermore, Tan and Wong believe the price fails to reflect two prominent developments, Vivocity and Mapletree Business City, which represent around 54% of MPACT’s income.
Further to their report, the analysts identify MPACT as a prime beneficiary of interest rate cuts, with a 1% cut driving up to a 2.4% increase in the REIT’s distribution per unit (DPU), which has not been factored in.
The analysts believe that concerns over a further write-off in Festival Walks’ value is unwarranted as “sequential improvement in cash flows in 1QFY2025 from Festival Walk implies that better times are ahead, and with the interest rate overhang tapering off, higher operating cash flows are likely to flow down to the bottom line”, they say.
MPACT has undergone portfolio optimisation in view of their next stage of growth, which is another plus in the analysts’ books.
“The recent divestment of Mapletree Anson solidifies the balance sheet position (pro-forma gearing of 38%, interest coverage ratio or ICR improves to [over] 3.0 times) and we believe that further asset divestments could be in the offing to further streamline the portfolio and thus reposition the REIT to recapture growth opportunities from its sponsor or third parties,” write Tan and Wong.
The analysts have identified economic uncertainties or downturns as a possible key risk for MPACT’s retail and office assets.
“The recent share price run in MPACT has legs, in our view, given expectations of lower risk profiles on the back of a more conducive interest rate environment,” say the analysts.
“With its share price still lagging that of larger cap S-REITs, we believe MPACT, trading at a 6% FY2025 yield, is very attractive”, they add. — Cherlyn Yeoh
SGX Group
Price target:
RHB Bank Singapore ‘neutral’ $11.70
Higher target price after August securities turnover data comes ‘well ahead’ of estimates
RHB Bank Singapore analyst Shekhar Jaiswal has increased his target price on the Singapore Exchange S68 (SGX) to $11.70 from $10.80 after the group’s August securities turnover data came in “well ahead” of his estimates.
On Sept 9, SGX reported that the securities daily average traded value (SDAV) grew 28% y-o-y and 19% m-o-m to $1.37 billion, the highest since March 2022. The implied 1HFY2025 SDAV was much higher than Jaiswal’s estimate. He expects volatility to persist within the securities market for a few months, given the US elections and interest rate outlook.
Given this, the analyst has raised his profit estimates for FY2025–FY2026 by 5% and 3.3%, given the higher SDAV estimates.
“We expect the volatility in the securities market to persist for a few months as investors await clarity on the interest rate outlook and the outcome of the US elections,” he writes in his Sept 10 report.
“SGX noted that the growth in trading activity originated from both institutional and retail clients and across stock segments,” he adds. In August, the exchange also highlighted that retail investors net purchased $685 million worth of securities, making this the highest in 10 months. Year-to-date returns from the benchmark Straits Times Index (STI) stood at 6.7%. However, the index fell by 0.4% m-o-m to 3,442.93 points as at the end of August.
Jaiswal also notes that SGX’s derivatives business remains strong, with total derivatives traded volume of 24.6 million contracts in August meeting his 1HFY2025 estimates. During the month, SGX’s foreign exchange (FX) and commodities derivative volumes exceeded his estimates. This was offset by the lower-than-estimated equity derivative volume.
In commodities, energy trading volumes saw a solid rise, and the rise in interest rates futures can be attributed to the recently launched three-month Tokyo Overnight Average Rate (TONA).
Jaiswal expects SGX will see an increase in equity listing in FY2025–FY2026 and the currently elevated SDAV to moderate in 2HFY2025 when investors gain clarity on the interest rate and global economic growth outlook. In the longer term, he expects the revenue growth of the derivatives business to “significantly exceed” the securities business revenue.
In addition, the analyst sees downside risks to the treasury income estimates, given potentially lower interest rates.
Despite his estimate upgrades, Jaiswal remains “neutral” on SGX and notes that the group’s forward yield of 3.3% remains “unexciting”.
The analyst continues to value SGX based on a forward P/E of 21 times, which is in line with the group’s historical average. — Cherlyn Yeoh
