PhillipCapital Research analyst Paul Chew has upgraded Hyphens Pharma from “accumulate'' to “buy” as he sees digital healthcare being a new growth and stock catalyst.
“Hyphens Pharma’s underlying growth strategy is to be a leading portfolio of proprietary skin health products and brands across Asia,” says Chew, who has also upped his target price to 43 cents from 34.5 cents.
In addition, Chew has raised FY2022 earnings by 40% to $9.2 million to incorporate earnings from the acquisition of Novem.
On May 27, Hyphens Pharma announced that Metro Holdings, a property and retail company, will be investing $6 million for a 10% stake in DocMed Technology (DocMed), valuing it at $60 million.
DocMed is a subsidiary of Hyphens Pharma and digital health platform.
See: Metro Holdings takes 10% stake in Hyphens Pharma subsidiary DocMed at $60 mil valuation
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DocMed owns Hyphens Pharma’s medical B2B hypermart POM Medical Hypermart (POM) and a licensed e-pharmacy WellAway. POM’s revenue in FY2021 came in at $41 million including offline sales.
DocMed will use the proceeds to build up its manpower across technology, operations and marketing areas and enhance its B2B platform to serve doctors. The platform can be enhanced with more pharmaceutical offerings, mobile features and a regional footprint across Asean. The expected timeline to enhance and expand the B2B platform is two years.
Chew views the transaction as a funding event rather than crystallisation or monetisation of Hyphens digital assets.
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“The proceeds have the potential to enhance the B2B platform with more doctors, pharmaceutical companies, transactions and new sources of revenue,” the analyst writes. “Such milestones could drive further rounds of financing and higher valuations.”
The analyst also notes how DocMed platforms will be an important platform to showcase their drugs to doctors. In turn, DocMed can generate new sources of revenue such as advertising and promotion from pharmaceutical companies.
Overall, Chew sees the creation and development of the digital healthcare platform DocMed as an additional growth and share price catalyst for Hyphens Pharma, with near-term earnings drivers being the acquisition of Novem and growth in specialty pharma sales due to the return of elective surgeries post-Covid-19. This is considering Hyphens Pharma's multiple-year growth strategy to expand its proprietary brands of skincare products across the region.
As at 10.29am, shares in Hyphens Pharma are trading at 0.5 cents up and 1.61% higher at an FY2022 P/B ratio of 1.5x and dividend yield of 2.4%.
