SINGAPORE (Nov 8): SAC Capital has initiated coverage on Hyphens Pharma International, a specialty pharmaceutical and consumer healthcare group, with a “buy” rating and target price of 28.5 cents.
The target price represents an upside of over 46% from Hyphens’ current share price.
This takes into consideration the company’s “footprint” in high-growth countries in Asean, sizeable target markets and growth potential for its proprietary brands, says the research house.
SAC Capital notes that gross domestic product per capita and health spending per capita show “strong” positive correlation, according to data from the World Health Organization.
As a result, an increase in affluence, accompanied by greater public awareness and a shift towards health-conscious lifestyles, encourages greater spending on healthcare and related products, it says.
To that end, SAC Capital has forecast FY19 revenue to increase marginally from FY18, driven by growth in the company’s proprietary brands as well as medical hypermart and digital segments.
“Moving forward, we expect stable revenue growth for the group,” SAC Capital analysts Chow Zheng Jie, Terence Chua and Nicholas Neo write in an initiation report dated Nov 8.
“Tailwinds from the regions tie in with the group’s plans to deepen its presence in Asean and internationalise its proprietary brands,” they add.
However, Hyphens could also face some headwinds ahead.
SAC Capital expects the company to face increasing competition in the digital sales segment from potential new market entrants.
Still, the impact on the company’s bottom line is less significant since margins from online sales are typically lower, it says.
As at 12pm on Friday, shares in Hyphens are trading flat at 19.5 cents, implying an estimated price-to-earnings (P/E) ratio of 9.7 times and price-to-book value (P/B) of 1.4 times.
