Can Pharma be worth RM 20 next year?

We had seen with our eyes how a pandemic create chances that are unthinkable in normal circumstances. The primary beneficiaries for this is gloves industry and their related companies.

By now, a lot of gloves companies already saw share price appreciated much, some with still room to go, some maybe priced in. But we do not know what will continue on, however, the near term can be seen as this pandemic will continue to be here for a little more while as the world enter into the 2nd wave.

Gloves companies such as Topglove, Supermax, Hartalega, Kossan, Careplus, Comfort, Rubberex, HLT had saw share price went up by many fold.

Other related industry are Hexza, Luxchem, Samchem, LKL, Ocncash also saw share price booming up.

Pharmaceutical company are catching up. Among them are PHARMA, DPHARMA, KOTRA, YSPSAH, AHEALTH.

Today focus is - PHARMA GETTING TO RM 20, PRACTICAL? REASONABLE ? DOABLE ?

We calculate here 1 by 1

Total share is 261.7 million, if RM 20 per share, means total market capitalization is just RM 5.23 billion. Only 5.23 Billion.

So can the coming future of Pharma earning able to justify PHARMA worth RM 5.23 billion, or RM 20 per share ?

1st, the usual normal operation is profit making, around 9 cents per quarter.

Hence, the valuation for this company at PE x 15 = RM 5.40

Secondly, Pharma is a good candidate for bottling of covid-19 vaccine with facilities ready.

Malaysia put it as 40 million people (citizen + foreigner combine)

Vaccine if selling RM 150 per dose and each person needing 2 dose.

40 million x RM 150 x 2 = RM 12 billion business opportunity annually

But Pharma got some established Indonesia operation, and can get exposure to more than 300 million people.

Got coverage in all the main indonesia island

And MPI is listing and 75% owned by PHARMA, hence can capture the large growth rate

Indonesia listed Millennium PI also can see share price increasing

So if PHARMA also can capture 15% of the 300 million people from INDONESIA market

45million people x RM 150 x 2 = RM 13.5 billion market business opportunity

So if PHARMA potential future business opportunity increased by 25.5 billion annually, profit margin 10%, and lets say only take 40% from the pie

So potential earning is RM 1 billion a year !!!!!!!

EPS will become RM 3.90 a year potentially !!! 

If value PE x 20 will become RM 78 !!!!!

RM 78 hard to believe right? So we take 30% from it, reasonable ? That is RM 23.40

So future can PHARMA share price go to RM 20 ? Now RM 4 better act fast

Why you should buy Pharma now

With the covid-19 pandemic spreading all over the world, glove industry had been making a big windfall from maxed out orders and higher average selling price due to orders from all over the world.

As the whole world is 7 to 8 months into the virus, the chase for vaccine development had been speeding up globally. R&D had been pouring out in US, Europe and China in search for the suitable vaccine candidate for this coronavirus.

How should this relate to Pharmaniaga (Pharma - 7081)

As you may see, our Malaysian minister had shortlisted 2 candidate to be the vaccine bottling process - Dpharma and Pharma. Subsequent on this new, the share price of this 2 companies had rocketed much, but is this fully valued?

Pharma still have a lot of potential to rise based on the company prospect and shareholding.

Pharma only have 261.7 million shares outstanding, at the current price range of RM 4, the market capitalization of Pharma is only RM 1.04 billion.

As you can see, BOUSTEAD already hold 56%.

LTAT holding 11.5%

Hence, majority of the shares (70% of the shares) are already being held by strategic investor that are not going to sell out, leaving the market with just 30% of the shares.

This means, just 78 million of shares are left floating in the market for the public. 

This is not discounting investment fund, unit trust fund investing into it and holding for longer term tenure, hence probably the market is only left with 30 million share for the retailer only.

A lot of you might be concerned on Pharma FYE 2019 loss of 57 cents per share. This is due to impairment of a system development, which is not going to be recurring, but a ONE OFF EVENT impairment.

Subsequent proof of result is PHARMA delivering 8.57 cent in earning per share with a 6 cent dividend.

Hence, based on this average result, ANNUAL EPS PROJETION is 36 cents

At PE x 15, PHARMA should be valued RM 5.40 based on existing performance.

So PHARMA is still a good buy, because it had not yet factor in VACCINE reselling and also potential in INDONESIA operation for vaccine reseller.

Keep you updated in next post.