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After record 3QFY2022, CGS-CIMB lifts TP, EPS and dividend forecasts on Hyphens Pharma

Jovi Ho
Jovi Ho11/25/2022 04:30 PM GMT+08  • 3 min read
After record 3QFY2022, CGS-CIMB lifts TP, EPS and dividend forecasts on Hyphens Pharma
Hyphens Pharma reported an almost threefold y-o-y jump in its 3QFY2022 profit after tax to $4.0 million from $1.1 million a year ago. Photo: Albert Chua/The Edge Singapore
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After posting record revenue and net profit in 3QFY2022 ended September, CGS-CIMB Research analysts Tay Wee Kuang and Izabella Tan say Hyphens Pharma International is steadfast in executing its business strategy.

In a Nov 24 note, Tay and Tan maintained their “add” call on specialty pharmaceutical and consumer healthcare group Hyphens Pharma with a higher target price of 40 cents from 39 cents previously. The new target price represents a 33.3% upside to its last traded price of 30 cents.

Hyphens Pharma reported an almost threefold y-o-y jump in its 3QFY2022 profit after tax to $4.0 million from $1.1 million a year ago.

Revenue, meanwhile, came in at $42.8 million, 46.7% higher from $29.1 million a year ago. The group’s newly-acquired Novem group of companies contributed some $3.8 million in revenue during the quarter.

Cyclical restocking by customers in Vietnam, ahead of product licence renewals that typically occur every two years, contributed to the strong 3QFY2022 earnings, write Tay and Tan. “The last round of licence renewals was in FY2020.”

According to Tay and Tan, Hyphens Pharma’s management warned of potential headwinds from inflationary pressures, supply chain disruptions and a potential economic slowdown that could disrupt supply-demand dynamics and lead to higher costs. “We also expect a step-up in operating costs from incubating DocMed, which houses Hyphens Pharma’s digital assets including its e-pharmacy and business-to-business (B2B) platform for two years with the $6 million raised from a 10% stake sale in DocMed in June 2022.”

See also: Shares in Hyphens Pharma surge 11% as 3QFY2022 earnings see 270.8% jump

Hyphens Pharma is potentially heading into an investment year, say Tay and Tan.

As at end-1HFY2022, Hyphens Pharma’s cash balance has recovered back to $28.4 million from end-FY2021’s $19.5 million post-acquisition of Novem with a low debt level of some $5.3 million.

According to the analysts, the healthy cash balance suggests that Hyphens Pharma could go into FY2023 with an eye out for investments, which can include acquisition of brands, businesses, as well as potential in-licensing from brand principals.

See also: 'A sigh of relief' as Suntec REIT closes FY2022, but outlook stays challenging: analysts

Nevertheless, Tay and Tan do not expect an immediate earnings impact due to regulatory approvals required before sales, along with slow adoption from the medical community.

Tay and Tan have raised their FY2022/2023/2024 earnings per share estimates by 18.4%/0.3%/12.2% as they expect a stronger FY2022, and normalisation of profitability from FY2023.

This could also pave the way for higher dividends, they add. “We project 1.27 cents for FY2022 based on its 30% payout policy, suggesting a yield of some 4%, while allowing the company to pursue potential growth opportunities. Potential re-rating catalysts include accretive acquisitions and strong growth of portfolio products while downside risks include margin compression and demand disruption.”

As at 4.23pm, shares in Hyphens Pharma are trading 0.5 cents higher, or 1.67% up, at 30.5 cents.

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