We initiate coverage on Malaysian Genomics Resource Centre (MGRC) with an OUTPERFORM rating and TP of RM1.07. MGRC, a Malaysia-based genomics and biopharmaceutical player, is poised for strong growth backed by the rising adoption of immunotherapy in the treatment of diseases, especially cancer. MGRC owns the exclusive rights to distribute, produce and commercialise therapeutics for personalised healthcare, and produces CAR T-cells for solid cancer immunotherapy in the Asean region under a 10+10 year licensing agreement.

A home-grown genomics player. MGRC is a leading genomics and biopharmaceutical player in Southeast Asia. From pioneering work in genome sequencing, bioinformatics analysis, and genetic screening services, MGRC has expanded into the high growth biopharmaceutical sector with immunotherapy for various types of cancer.

Capitalising on rising adoption of immunotherapy. The size of the global immunotherapy market is projected to grow to USD275b by 2025 from USD163b in 2020, translating to a CAGR of 11%, driven largely by the rising adoption of immunotherapy in the treatment of diseases especially cancer, as well as post conventional treatments. Within the segment of cancer immunotherapy alone, the global CAR T-cell therapy market is expected to reach USD51b by 2028, translating to a CAGR of 63.8%. Cancer treatment has dominated the global immunotherapy market.

Exclusive rights to distribute CAR-T cell in the Asean region. MGRC owns the exclusive rights to distribute, produce and commercialise therapeutics for personalised healthcare, and produce CAR T-cells for solid cancer immunotherapy in the Asean region under a 10+10 year tripartite licensing agreement signed with principals iCARTAB Biomedical Company Limited and Advanced Immune Therapeutics Sdn Bhd.

Strong earnings growth in FY24. We project MGRC’s net profit to resume its growth trend in FY24, rising 37% YoY driven largely by the rising demand for its high-margin biopharma/cancer immunotherapy. This follows a 14% contraction in earnings in FY23 due to the slowing vaccine distribution business (as the pandemic comes to an end) and start-up costs incurred at its new laboratory.

Initiate coverage with a TP of RM1.07. We like MGRC for: (i) the rising adoption and hence the tremendous growth potential of immunotherapy globally, (ii) having the exclusive rights to deliver such therapy in the region under a long-term licensing agreement with reputable principals, and (iii) it being the leading provider of genetic sequencing and analysis in Southeast Asia.

We value MGRC at RM1.07 based on 17x FY24F EPS, in line with the average of its international peers. There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us (see Page 10).

Source: Kenanga Research - 31 Oct 2022