SINGAPORE (20 July): PhillipCapital has initiated an “accumulate” call for Hyphens Pharma International Ltd with a target price of 43.5 cents.
The target price represents an upside of about 3.6% from Hyphens’ last closed share price of 42 cents.
Analyst Tay Wee Kuang said the investment merits include the fact that Hyphens Pharma is the sole regional product owner of an extensive portfolio of pharmaceutical and health supplement products.
He added the company has also built up its product portfolio by entering into exclusive distributorship or licensing and supply agreements with brand principals such as Sofibel and Guerbet, as well as developing its own suite of dermatological and health supplement products through its brands Ceradan, TDF and Ocean Health.
Furthermore, exclusive ownership of its product portfolio allows Hyphens Pharma to enjoy customer loyalty and a pricing premium. Portfolio sales combined to contribute 67% of Hyphens Pharma’s revenue in FY19, with the remaining 33% contributed by the Medical Hypermart and Digital segment.
In Singapore, Tay said Hyphens Pharma’s acquisition of Ocean Health in 2016 paved the way to introduce the Group’s portfolio into the retail market. As Ocean Health has an established retail presence in the local pharmacies such as Guardian and Watson’s, this provided Hyphens Pharma with valuable additions to its portfolio, as well as securing shelf space in the retail space for other products within its portfolio.
Apart from expanding into the physical retail space, Hyphens has also moved its products to e-commerce platforms such as Lazada, RedMart and Shopee. Tay thinks Hyphens will continue to enjoy top-line growth of its products, as its footprint in the consumer sector grows.
Finally, Tay points out that by establishing itself within the value chain by undertaking high-value business functions such as sales and marketing for its extensive product portfolio while outsourcing capital- intensive functions such as production and logistics, Hyphens Pharma has managed to pursue an ‘asset-light’ business model.
As a result, Hyphens is able to maintain a high margin business, with expenses contributed largely by marketing and distribution and maintaining low capital expenditure (CAPEX) over the past 5 years.
As at 12.32pm, shares of Hyphens were trading at 8 cents higher, or 19.0% up, at 50 cents.
