INVESTMENT HIGHLIGHTS

• 1QFY18 earnings of RM19.6m (+11.7%yoy) came in within our and consensus expectations

• The logistics and distribution division as well as the Indonesian’s operation recorded stronger performance

• Declared an interim dividend of six sen per share

• Maintain BUY with a revised TP of RM2.74 per share

Double digit earnings growth. Pharmaniaga’s 1QFY19 earnings came in at RM19.6m which met ours and consensus earnings estimates at 40.6% and 34.8% respectively. Historically, 1Q earnings contributed an average of 38.4% to the full year earnings in the past three years. The stronger 1QFY19 earnings was driven by a stronger performance from both the logistics and distribution (L&D) division as well as the Indonesian operation.

Commendable revenue growth from L&D division. Pharmaniaga’s L&D division’s business primarily constitutes of the government concession contract. This concession contributed an average of 51.0% of total revenue in the past three years. The 1QFY19 revenue and operating profit for this division registered a growth of +28.1%yoy (RM582.6m) and +26.9%yoy (RM12.6m) respectively. This is due to the stronger contribution from government hospitals.

Indonesian operation has turned profitable. Pharmaniaga’s Indonesian operation historically contributed an average of 30.0% of total revenue in the past three years. While revenue has been growing steadily, the operating profit has been affected by the weaker Indonesian Rupiah in relative to Ringgit. However, a solid growth in 1QFY19 revenue of +22.5%yoy coupled with ongoing cost optimisation effort has led to an operating profit of RM0.4m in comparison to a loss of RM0.4m in the previous year corresponding quarter.

First interim dividend declared. Pharmaniaga declared a first interim dividend of 6.0sen per share (vs 1QFY18: 5.0sen) for the quarter under review.

Source: MIDF Research - 17 May 2019