Apex Healthcare (ApexH) announced that its subsidiary in Singapore had on 31st August 2021 signed a Supply Contract (agreement) with Innova Bio Medical Pte Ltd (Innova) for the supply of the Sinopharm COVID-19 vaccine to private clinics and hospitals in Singapore. We welcome this development as it marks the Group’s first COVID-19 vaccine distribution after expanding its cold chain distribution capabilities last year. While we foresee ApexH is expected to earn a mid to high single-digit profit margin from this COVID-19 vaccine distribution, we believe profit contribution to the Group is likely to be immaterial due to low distribution volume during the initial period. As such, our FY21-23 earnings forecasts are kept unchanged. We maintain our Underperform rating on ApexH, with an unchanged TP of RM2.35.

• To supply COVID-19 vaccine. As 80% of the population in Singapore has been fully vaccinated under the national vaccination program, the Health Ministry is now permitting private healthcare to import and administer other COVID-19 vaccines. Pursuant to the agreement, Innova will supply Sinopharm vaccine to ApexH for sale and distribution to private clinics and hospitals within Singapore. Based on confirmed orders, the initial quantity to be supplied is 31,600 doses and is scheduled for arrival in mid-September 2021.

• Our view. We welcome this development as it marks the Group’s first COVID-19 vaccine distribution after expanding its cold chain distribution capabilities in Singapore and Malaysia in 2H last year. While it is difficult to gauge the potential earnings contribution from the current and upcoming orders, our observation suggests that the essential COVID-19 vaccine has been sold at a low single digit profit margin (c. 2.5%) to the Government. Nonetheless, given this special access route for the private sector in Singapore is not subsidized by the Government, we reckon ApexH could secure a mid to high single digit profit margin from this COVID-19 vaccine distribution.
  That said, we deem profit contribution from the initial quantity to be immaterial to the Group due to low volume supply. Although there is a possibility of more sales would come from a planned COVID-19 vaccine booster, we think it is still at an early stage to see this vaccine booster campaign to be launched anytime soon. We opine the health regulators may need more time to collect and review all the necessary data on the safety and efficacy of all COVID-19 vaccines. In addition, given 80% of Singapore population has been vaccinated, there could be supply competition and prospect for the price ceiling, hence we think the contribution of COVID-19 vaccine sale and distribution at this state to be negligible.

Source: PublicInvest Research - 6 Sept 2021