Pharmaniaga has entered into a non-binding MOU with NIBM to collaborate on the R&D of vaccines. We are positive on this development, as we believe that this collaboration will augur well for Pharmaniaga’s plans to establish the world’s first halal vaccination plant and could also aid Malaysia in developing the country’s first vaccine. We keep our earnings forecast unchanged, as we do not expect any meaningful earnings contribution from this collaboration in the near term. Reiterate BUY, with an unchanged TP of RM1.13, derived based on a PE multiple of 21.5x (at +2SD of its 5-year mean) on its FY22f EPS of 5.2 sen.

NEWSBREAK

MOU. Pharmaniaga has entered into a non-binding Memorandum of Understanding (MOU) with the National Institutes of Biotechnology Malaysia (NIBM). The MOU executed is mainly for both parties to collaborate on the research and development (R&D) of vaccines and the MOU shall remain in force for 3 years.

NIBM. Pursuant to the National Biotechnology Policy, NIBM was established to accelerate the growth of the Malaysian biotechnology industry. It is responsible in promoting a knowledge-based economy by building a sustainable ecosystem of R&D, innovation and commercialization in agriculture, pharmaceutical and genomic biotechnology.

Roles. Both the parties will mainly (i) provide technical services particularly on R&D of vaccines, (ii) provide industrial and stakeholders input via discussions, as well as (iii) organize joint training programs for NIBM and Pharmaniaga’s staff.

HLIB’s VIEW

Pharmaniaga had previously expressed its plans to produce its own halal vaccine in 4 years’ time and its partnership with the Serum Institute of India (SERUM) also involves technological transfer that could aid with the growth of Pharmaniaga and the biotechnology industry with Malaysia.

We view this new collaboration with NIBM in a positive light as we believe that this move will augur well for Pharmaniaga’s plans to establish the world’s first halal vaccine manufacturing plant in Malaysia and would also aid in the development of Malaysia’s first vaccine. This is also in line with the Malaysian government’s plan to turn the country into a vaccine production hub in future.

Forecasts. Keeping forecast unchanged as we do not expect any earnings contribution arising from this collaboration in the near term.

Maintain BUY. We keep our BUY recommendation on Pharmaniaga, with an unchanged TP of RM1.13. Our TP is derived based on a valuation of 21.5x PE (at +2SD of its 5-year mean), on its FY22f EPS of 5.2sen. We continue to like Pharmaniaga for (i) the vaccination of adolescents in Malaysia, (ii) potential use of Sinovac as booster shots, (iii) potential use of Sinovac to inoculate children between age 5 to 12, and also (iv) potential export of Sinovac vaccines to other countries.

Source: Hong Leong Investment Bank Research - 2 Nov 2021