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UG Healthcare's earnings surge over 70x to $22.7 mil for 1QFY2021 on higher revenue

Felicia Tan
Felicia Tan • 3 min read
UG Healthcare's earnings surge over 70x to $22.7 mil for 1QFY2021 on higher revenue
Shares in UG Healthcare closed 2.5 cents higher or 2.6% up at 98 cents on Nov 5.
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UG Healthcare, on Nov 5, reported earnings of $22.7 million for the 1QFY2021 ended September, registering a growth of over 70 times from the $305,000 reported a year ago.

See: ‘Buy’ UG Healthcare on the expectation of 50x higher profits: CGS-CIMB

In its business update, the group says its current upstream manufacturing capacity of 2.9 billion pieces of gloves per annum, which produces both nitrile and natural latex examination gloves, is operating at its “optimum efficiency”.

Of that figure, some 85% of gloves are sold in the group’s own-brand “Unigloves” through its own downstream distribution companies.

Revenue for the 1QFY2021 more than doubled to $71.2 million from the $26.3 million posted the year before, due to the higher volume of gloves sold and average selling prices (ASPs) on the back of stronger demand for disposable gloves.

Gross profit for the quarter grew to $43.1 million from the $5.0 million in 1QFY2020, while gross profit margin (GPM) grew 41.7 percentage points to 60.6% from 18.9% a year ago.

The higher GPM increased significantly as the group recorded higher margins for its upstream manufacturing and downstream distribution businesses, driven by the group’s original brand manufacturing business model.

For the quarter, the group says its operating expenses were relatively stable and finance costs were reduced with lower borrowings.

Among its key markets, the group saw the highest revenue in Europe at $30.8 million. South America, at $21.9 million revenue, came in next. Asia was third with a revenue of $7.0 million for the 1QFY2021.

The group says it will continue to support “the growing demand through its own downstream distribution companies in all the key markets for both developed and developing countries.”

“Currently, the distribution companies have to manage the allocated inventory on a very tight schedule based on just-in-time delivery,” it says.

As at Sept 30, cash and bank balances stood at $24.1 million, up from $9.3 million from the previous quarter.

Its net asset value (NAV) per share was 16.09 cents as at Sept 30, up from 9.23 cents after its share split as at June 30.

“We will continue to cultivate demand for our proprietary ‘Unigloves’ range of disposable examination gloves, and look into expanding the range of ancillary healthcare products which we can market and sell through our entrenched downstream distribution networks worldwide,” says Lee Juh Yih, UG Healthcare’s executive director and finance director.

“We believe that our Group’s strategy will drive production volume in our upstream manufacturing, and enhance flexibility and sustainability in our business operations,” he adds.

The group says it is on track to achieve its production capacity expansion plans to cope with the higher demand. The plans include increasing production capacity by 500 million pieces of gloves per year, bringing the group’s total production capacity to 3.4 billion pieces of gloves by end March 2021.

“We expect the Group to benefit from further economies of scale with these additional capacities beyond FY2021,” says Lee.

Shares in UG Healthcare closed 2.5 cents higher or 2.6% up at 98 cents on Nov 5.

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