Pharmaniaga has offered to supply Sinovac vaccines to the MOH to be used as booster shots for eligible recipients who favour Sinovac. It is currently at the final stages of discussion to have the Sinovac vaccine registered as a booster shot with the NPRA, and expects the approval to be granted soon. Based on our back of the envelope calculations, a supply of 11m doses to the MOH is estimated to contribute c. RM12m at the EBIT level. We expect this positive news to spur buying interest on Pharmaniaga, although there is no clarity as to how many doses the group would be supplying to the MOH this time around. Maintain BUY, with an unchanged TP of RM1.13, valued at 21.5x PE (at +2SD of its 5-year mean) on its FY22f EPS of 5.2 sen.

NEWSBREAK

Pharmaniaga has offered to supply Sinovac vaccine to the Ministry of Health (MOH), to cater to recipients who favour receiving it as their booster shots. The group currently is in its final stages of discussion to register Sinovac as a booster shot with the National Pharmaceutical Regulatory Agency (NPRA) and expects approval to be granted soon.

Sinovac recipients will be eligible for a booster shot three months after they have completed their vaccination, and considering that majority of the Sinovac recipients have received their second dose between the month of June and September, therefore booster shot supplies would be needed from December onwards.

Thus far, Pharmaniaga has collectively supplied more than 22m doses of Sinovac vaccines to the MOH and private sector, therefore there would be c.11m individuals eligible for a booster shot.

HLIB’s VIEW

Sinovac recipients are only given a heterologous booster shot currently with the Pfizer booster dose administered to eligible persons. However, Johor DAP leader, Dr Boo Cheng Hau noted that about a fifth of the booster dose recipients have refused a Pfizer booster, as they favour receiving the same vaccine for their third dose.

Based on our back of the envelop calculations, supplying 11m doses to MOH could add c.RM12m at the EBIT level. This is based on an estimated purchase price of USD11 (RM44) per dose and an EBIT margin of 2.5% (3-year average) for Pharmaniaga’s logistics and distribution division.

We expect the positive news to stimulate buying interest on Pharmaniaga, although at the current juncture, there is no clarity as to how many doses Pharmaniaga could potentially be supplying to the MOH.

Forecasts. Keeping forecast unchanged pending further clarity.

Maintain BUY. We keep our BUY recommendation on Pharmaniaga, with an unchanged TP of RM1.13. Our TP implies 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 for 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 - 8 Nov 2021