KUALA LUMPUR – RHB Investment Bank Bhd (RHB IB) has upgraded the rating of Duopharma Biotech Bhd from “sell” to “buy” with a new target price (TP) of RM4.00 per share, following increased clarity on the company’s participation in Malaysia’s Covid-19 vaccination programme.
The TP is an 18% increase from RM3.30 previously.
In its research note, RHB IB said Duopharma and Pharmaniaga Bhd have been recognised by the government as potential companies to undertake the fill-and-finish process for vaccines.
“As Duopharma has the fill-and-finish capacity of six million vials, or 60 million doses, per year, we believe that there is a high chance of it participating in the Covid-19 vaccination programme.”
The upgrade by RHB IB also follows the government’s recent extension of Duopharma’s human insulin supply contract for one year, from December 2 last year to December 1 this year.
The company also has a stable earnings outlook, as 50% of its revenue is from the government.
“Duopharma also disclosed that the remaining value of products, yet to be drawn down by the government, stood at RM69.1 million.
“We are positive on this due to the higher financial year 2021 revenue visibility, although we have already input this into our earnings forecasts previously,” the investment bank said.
On a separate note, integrated financial service provider CGS-CIMB has raised Pharmaniaga’s rating to “hold” with a TP of RM5.41, from a “reduce” rating of RM4.15 previously.
Pharmaniaga on January 12 signed an agreement with Sinovac Biotech Ltd to purchase the Covid-19 vaccine. The agreement stipulates the execution of a technology and know-how license agreement, which will be needed for the relevant final approvals with the National Pharmaceutical Regulatory Agency.
“The premium (TP) is to reflect potentially stronger earnings prospects from vaccine manufacturing in the longer term, which we think is already priced in at current valuations,” CGS-CIMB noted.
It added that the vaccine is to be purchased in ready-to-fill bulk form, and the fill-and-finish process will be carried out by Pharmaniaga at its small-volume injectables (SVI) plant in Puchong.
“Pharmaniaga shares that the additional investment to retrofit the plant for the process is small, at about RM3 million, and estimates that the SVI plant will have a fill-and-finish capacity of two million doses a month at full capacity.
“In terms of logistics, we gather that the Sinovac vaccine requires normal refrigeration of 2°C to 8°C, which is well within Pharmaniaga’s logistic and distribution capabilities.”
Pharmaniaga is already distributing various forms of vaccines to government hospitals and clinics that require cold chain temperatures of 2°C to 8°C. – Bernama, January 14, 2021
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