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'Add' Hyphens Pharma as it moves on to its next phase of growth

Samantha Chiew
Samantha Chiew8/18/2022 02:34 PM GMT+08  • 3 min read
'Add' Hyphens Pharma as it moves on to its next phase of growth
CGS-CIMB Research likes Hyphens Pharma for its stellar 1H earnings and growth plans.
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Analysts are remaining upbeat on Hyphens Pharma following its latest 1HFY2022 ended June results.

To recap, Hyphens Pharma’s 1HFY2022 saw growth in all segments, with overall revenue coming in at $80.7 million, some 26.5% higher y-o-y, ahead of the analysts’ 55.6% growth for FY2022.

All three segments observed y-o-y revenue growth, with specialty pharma principals and proprietary brands growing significantly at 44.7% y-o-y and 15.9% y-o- to $48.2 million and $10.8 million, respectively.

Better operating leverage also led to a 44.6% higher y-o-y net profit of $6.2 million, exceeding expectations at 76.8% of the analysts’ 76.8% FY2022 estimates.

CGS-CIMB Research is reiterating its “add” recommendation on Hyphens Pharma International with an increased target price of 39 cents from 36 cents previously, as analysts Tay Wee Kuang and Izabella Tan are positive on the group’s latest 1HFY2022 results.

The analysts are also upbeat on the group's prospects for its “next phase of growth” is already making headways to grow its proprietary brands.

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The launch of the group’s Omega-3 in Vietnam and D-Vita in Malaysia laid the groundwork for growth of brands such as Ocean Health and Ceradan regionally, although the analysts are aware that brand-building could take some time.

“More product launches are expected for the rest of FY2022 in regional markets, with crossing the hurdle of product registrations an important milestone that indicates the start of sales generation in new markets,” writes Tay and Tan in their Aug 15 report.

Separately, Hyphens Pharma’s distributorship with principal Biosensors International Technologies is expected to lapse by end-December this year. The Biosensors portfolio has decreased in revenue contribution over time from 17% of FY2017 revenue to just 6% (or $4.8 million) of 1HFY2022 revenue.

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According to management, the cardiology specialisation has been a laggard and the group intends to exit the specialisation with this lapse. “We also understand from management that no other major distributorship contracts are due for expiry in the near term,” adds the analysts.

Overall, the analysts see growth opportunities for the group. They say: “We think Hyphens Pharma can sustain its revenue growth with an expanded portfolio, by tapping on levers such as introducing existing products into new markets, as well as potential product/business acquisitions.”

Separately, SAC Capital also keeping their "buy" recommendation on Hyphens Pharma with a target price of 46 cents, as analyst Peggy Mak is positive on the group's growth from organic and inorganic means. She notes that the group's inclusion of its latest acquisition of Novem has boosted both revenue and net profit for the period.

On the outlook, Mak says: "We expect healthcare spending to normalise in 2HFY2022 as pent-up demand wanes. The sale of Biosensors’ products in Vietnam will dwindle when the distribution agreement expires at end 2022. This accounted for a mere 3% of sales in FY2021."

Meanwhile, she expects the ramp up in DocMed’s development milestone to incur about $1 million in opex in FY2022 and $2 million in FY2023. This represents hald of her earlier estimates as the second half is seasonally lower than the first half.

As at 2.30pm, shares in Hyphens Pharma are trading 1.59% higher at 32 cents, giving it a FY2022 P/E of 8.67x with a dividend yield of 3.4%.

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