MCLEAN TO BE RIDING HIGH ON VACCINE LOGISTIC CHAIN SUPPLY ?

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For 2020, the most happening trades in the share market would be gloves and vaccines related companies, and logistic company that is going to be involved in distribution of vaccines.

 

Gloves company, you know who they are. Vaccine related companies that had inked MOU for distribution or manufacturing will be those like BINTAI, SOLUTION, HWGB. But how will the MOU goes, or will it materialized, that is another question, but so far, the companies shares are goreng goreng.

 

Logistic transportation are also on the hype, such TASCO that provide cold chain transportation services. TNLOGIS are also in the mood.

 

However, one might be wondering, what about companies involved in BULK PACKAGING FOR TRANSPORTATION OF VACCINE? Any listed companies in Malaysia will be close to be doing that?

 

 

IF YOU ARE WONDERING WHICH COMPANY, LET ME SHOW YOU A POTENTIAL COMPANY LISTED IN KLSE THAT HAD THE CAPABILITIES TO PROVIDE BULK PACKAGING CONTAINER FOR VACCINE TRANSPORTATION.

 

This company is MCLEAN TECHNOLOGIES BHD (MCLEAN - 0167)

 

MCLEAN mainly provide few services

1. Services for HDD industry including assembly process, cleaning and washing.

2. Services for Surface treatment for HDD industry, semicon, printers and oil and gas.

3. Manufacturing of packaging products - all types of tray, plastic corrugated partition, and customized plastic pallet that can withstand up to 1000KG load.

 

Since this is about packaging, so we will talk about the packaging segment of MCLEAN.

 

 

Below is the example of an insulated plastic pallet shipper for vaccines and other medical products.

 

 

 

 

 

More dimension to see how this plastic pallet looks like

 

 

 

 

 

The above is China brand plastic pallet shippers for medical items, including vaccines.

 

 

So what about MCLEAN ?
 

MCLEAN ALSO DOING SIMILAR PRODUCTS IN MALAYSIA AT JOHOR.

 

 

 

Their product now is servicing the semiconductor industry packaging. Customer include KESM.

So here are the image of the products, can be customized to suit customer needs.

 

So, can MCLEAN ride big on this?

 

Malaysia minister say that they want Malaysia to be a vaccine manufacturing hub in South East Asia, probably this will be able to change the fortune of MCLEAN in the coming future.

 

Now MCLEAN share price still looking good, around 20 cents range.

 

 

I believe MCLEAN will be having positive changes in 3 to 6 months time.

 

This is not a buy / sell / trade call for MCLEAN. Only informed of the potential prospect for MCLEAN. Any investment or trading decision, please do your own due diligence.

 

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Pharma already price in for current quarter result and prepared for future earning

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As I had been invested in Pharmaniaga, the result that is release on Wednesday evening could had gotten some mixed feeling over revenue and profits.

While there are some investor which are expecting a very good revenue and profit, however, it turn out that the profit is still going good, but not explosively tremendous until it will see the stock limit up. According to analyst, the result is within expectation.

Pharma revenue did improve by 44 million, and earning increase. There is some slight drag down on Indonesia operation due to payment from Indonesia government could be slightly hard during this trying time. Other than that, it is good.

https://www.thestar.com.my/business/business-news/2020/08/19/pharmaniaga-2q-net-profit-higher-at-nearly-10mil

The result could be factored into the price from a peak of RM 5

As you can see, the current price of RM 4.40 is more than 10% adjusted from the peak of RM 5.00, which is reflective of the current quarter result, but anticipating on the future revenue from the vaccine bottling and distribution effect.

If we are to compare on the virus outbreak and movement of share price, the Coronavirus got detect in the middle of December 2019 in WUHAN, CHINA. It got into momentum earlier this year, and global lock down on March 2020. However, most of the gloves share price are still not moving drastically upwards. It took almost 4 months for gloves company to consolidate, and journey to >1000% capital appreciation.

Hence, this will be the same for Pharma. The revenue and profit is there, but there will be waiting, but any good news on Vaccine development will spike the interest of investor in Pharma.

Currently, there are 2 vaccines under approved for limited use. One is from RUSSIA, and another from CHINA by Cansino Biologics. 

https://www.thestar.com.my/aseanplus/aseanplus-news/2020/08/18/china-grants-country039s-first-covid-19-vaccine-patent-to-cansino

It is prime time now for Malaysian counterparts to get ready for Vaccine sourcing in order not to get stuck in the bottleneck of orders.

Further news from Minister of Science Technology and Innovation, Khairy Jamaluddin is recommending that the vaccine to be provided free to ALL MALAYSIAN. If this will come through, Pharma / Dpharma could be almost certain in getting a confirmed sales of approx 80 million doses (if 2 doses required per person)

https://www.channelnewsasia.com/news/asia/covid-19-coronavirus-malaysia-vaccine-free-for-all-13034404

Any drop in Pharma share price will be a good opportunity to scoop in due to the confirmed revenue and sales from the government.

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PHARMA technical chart consolidation points towards imminent break out at RM 5

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As you know, I am staunch supporter of Pharmaniaga (PHARMA - 7081). As vaccine is a sure thing to happen, Pharma is a sure thing to profit from this vaccine bottling and distribution. It is only a matter of time.

We witness how powerful glove company can rally. I believe Pharma also can be this powerful when the vaccine solution arrived.

Today closing RM 4.75 give PHARMA a total market cap of RM 1.24 billion, which I still consider it very cheap.

Even DPHARMA got a higher market cap compared to Pharma although Pharma earning is better. DPHARMA market cap is RM 2.16 billion.

So if PHARMA need to go to RM 2 billion market cap, the share price need to be RM 7.66 to reflect this

I believe PHARMA will continue to see strong uptrend this month especially when QR is coming out.

Based on the latest chart that Pharma is going on, it is matter of time RM 5 will be break out. Consolidation is pointing on breakout happening this couple of days. RM 5 already been test 3 times, I believe 4th time will see a strong break out and many retailer will start chasing it.

Since Pharma is destined for vaccine bottling and distribution to government hospital in Malaysia, and probably Indonesia, it will be good to invest into Pharma to capture the growth. Anything below RM 5 will be a good entry point as break out above RM 5 is very soon technically.

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Coronavirus (covid-19) created a vaccine business worth USD936 billion yearly!!! What you need to do to capitalize on this?

The COVID-19 has indeed created a lot of fear, cracked up a lot of economy, creating hyper inflation from government stimulus, but it also add into a potential business worth USD 936 billion annually!!!

Yes, you read it right, it will not be a one off event, but rather a annually / seasonal vaccine that will require human to spike up immunity defense against the virus.

According to BioNTech, PFIZER, SHANGHAI FOSUN partnership, this coronavirus vaccine shot will be needed seasonally. The virus is expected to be here to stay, hence annual vaccination is required to spike up human immunization against the virus.

Based on the global population of 7.8 billion people, each dose costing USD 60, and with 2 dose vaccination, this is equivalent to USD 936 billion annually!!!!

Pharmaceutical companies are going to make the heist, and that is for sure! 

What can you do as a Malaysian investor in order to capitalize on this opportunity?

Luckily for our minister, the Malaysian counterpart had put in intention that the vaccine will not be imported as a fully finished product, but to be import as a partly finished, with the end bottling process to be finished in Malaysia pharmaceutical companies which are capable of handling it.

If you do not understand, this is like buying a CKD version of BMW or MERCEDES instead of buying a CBU version. This will create job opportunity for Malaysian, which is beneficial for the nation.

Currently, 2 most suitable pharmaceutical for this bottling process is Dpharma and Pharma.

While both are good, I will prefer Pharma due to

1. Government supply contract to government hospital

2. Established supply chain, logistic and network

3. Lower share outstanding compared to Dpharma, hence capital gain are higher due to less dilution of profit

Global pharmaceutical company are going fast and rushing into the vaccine.

Time line expected to see it at Q4, October 2020..

Just like Glove.. Since the detection of coronavirus, Glove are muted for 4 months from December until April... After that, all hell break lose..

Pharma will be the same.. Now it is muted at this level around RM 4.00..

But when the vaccine comes, it will not be RM 4.00, and you will have to risk chasing higher and higher and roller coaster...

Invest now or chase later? That is your decision to make.

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.