PhillipCapital analyst Tay Wee Kuang has maintained his “accumulate” call on catalist-listed pharmaceutical distributor Hyphens Pharma with an increased target price of 49.5 cents from 43.5 cents previously following the company’s 2Q20/1H20 results.
On August 13, Hyphens Pharma posted a 32% y-o-y surge in earnings of $2.2 million for 2Q20 ended June, and $4.3 million for the 1H20, which represented a 39.8% growth.
Revenue for 2Q20 and 1H20 rose 4.1% and 10.1% y-o-y to $30.2 million and $56.0 million respectively due to increased contribution from all three of the company’s business segments.
The strong revenue in 1H20 was also held up by a robust 1Q20 performance, as well as 24% growth y-o-y in revenue in Hyphens Pharma’s proprietary brands in 2Q20.
The demand for the company’s Ceradan and Ocean Health brand portfolio in 1H20 was benefitted by Hyphens’ move towards online sales channels in late FY19.
Cash flow for 1H20 was down $1.7 million due to elevated inventory levels in anticipation of disruptions arising from product license renewals in Vietnam.
Despite the slower 2Q20 compared to the previous quarter, the company’s underlying revenue growth remained “intact”.
Specialty pharma principals, as well as the medical hypermart and digital segments, saw growth of 7% and 8% y-o-y in 1H20 respectively despite the slowdown due to disruption from Covid-19.
For 2Q20, the company acquired hair growth product brand CG 210 to strengthen its proprietary brands portfolio. The brand will be sold through medical channels in Singapore and retail channels in Malaysia with plans to shift sales to retail channels for the Singapore market.
Hyphens’ new product launches across its existing brand portfolios Ceradan and Ocean Health will also provide the company with new revenue streams.
On August 18, Hyphens Pharma inked an exclusive agreement with lifestyle group SUTL to distribute health supplement product Ocean Health in Hong Kong.
SUTL is known for its extensive distribution network of fast-moving consumer goods (FMCG) brands across 14 markets in Asia.
The deal will provide the company with an established retail sales channel for its Ocean Health products to enter a competitive market.
Tay has also adjusted his earnings estimates for FY20 by 25% to “reflect strong top-line growth and income recognised from the Job Support Scheme in Singapore”.
“We also adjusted terminal growth rate from 1.5% to 2.0% to represent the plentiful organic and inorganic growth opportunities in the long term within the fragmented industry,” Tay adds.
Shares in Hyphens Pharma closed flat at 45 cents on August 20.
