Pharmaceutical distributor Hyphens Pharma has a unique game plan that involves growing its proprietary brands segment by growing its offerings of beauty and personal care products.
The company is doing this through its recent acquisition of CG 210 – a brand carried by the Switzerland-based Legacy Healthcare – to provide products that address hair loss.
These will complement its other brands such as skincare lines Ceradan and TDF Derma Formula as well as its Ocean Health supplement range.
Hyphens’ latest move has positioned “the proprietary brands segment further into the beauty and personal care product space,” notes KGI Securities analyst Kenny Tan in his Nov 6 initiation report.
“Skin is the game - Asia-Pacific is the fastest growing region for the beauty market, and with new product releases in its two major brands Ceradan and Ocean Health, we expect the business to maintain double digit growth, exemplified by the 23.7% year-on-year sales growth in 1H20,” he adds.
Meanwhile, Tan views Hyphens as an “appealing partner” for pharma brands looking to expand their presence in Asia. This is as the company has “built up a fair strong distribution network in Asia, with a direct presence in four emerging Asean markets,” he explains.
Aside from its product offerings, Tan points out the company’s presence on e-commerce platforms such as Shoppee and Lazada as a plus point that has helped it reach out to customers particularly during the lockdowns imposed to curb the spread of Covid-19 infections.
“Online penetration of beauty and personal care product sales are the highest in the Asia Pacific region, and we expect this to also contribute to sales for the proprietary brands segment,” mulls Tan.
To this end, he is initiating coverage on the pharmaceutical distributor with an “outperform” call and a target price of 48 cents.
“We valuate using Price-to-Earnings methodology, applying a 17x peg to FY21F earnings,” explains. Tan He believes his call price gives the counter a 20% upside from its 40 cent price on Nov 5.
As at 11.55am, Hyphens Pharma was trading down 2.5 cents or 5.95% at 39.5 cents.
