EPS estimation : (7.02+5.27) x 2 =24.58sen

PE ratio : 18 (based on Pharma Niaga and 

Hovid PE ratio)

Target price : RM4.42

I am here to ANSWER a simple question. Why

YSPSAH?

1) Finance result improved (revenue increased,

profit margin increased, export increased)

2) Healthy balance sheet

3) Support from ultimate parent company,

Yung Shin Pharmaceutical Industrial Co., which is the listed in

Taiwan stock exchange. 

4) Highest profit margin and lowest price earning

ratio among peers

5) Currency gain

6) Expansion and automation program on the

way

Introduction

Y.S.P. Southeast Asia Holding Berhad (YSPSAH)

listed in Bursa Malaysia since 2004. Upon listing

until today, the company's market value have

been increase from 23.6millions to today

281millions. The revenue also jumped triple from

75millions to 210millions today.

The principal activities of the company mainly diversified into 3 categories:

1) Pharmaceutical - Prescription (medicine sold

with the advice from doctor) and non-precription

(over-the counter medicine/pharmacy medicine)

(70percents of total revenue)

2) Veterinary (medicine for animal) (12percents

of total revenue)

3) Miscellaneous (medical device, first aid kits,

condom, medical aids and insert repellent)

(18percents of total revenue)

For more information about YSPSAH and the

history of the company in Malaysia, you can

refer the video below from YSPSAH's annual

dinner 2014 (5minutes long)

https://www.youtube.com/watch?v=ddGVj9snL3k

Why YSPSAH?

1) Finance result improved (revenue increased,

profit margin increased, export increased)

From the latest 2 quarter result, you can see the profit have been increased by 72% and 71% respectively. It is mainly due to higher revenue, more efficiency operation and improvement in profit margin.

So how is next quarter result? As the flying colour result shown by latest both quarter? Is the result will be continue? If assuming that the result stood at 6sen, I will be 733% increased in profit in next quarter!!

2) Healthy balance sheet

As per quarter report ended 31 December 2015, the company balance sheet shown that the company owned 55.6millions cash and 17.1millions of bank borrowing. which consider as net cash company. Hence the company will not have any cash flow problem for the working capital and expansion. Further more, the company also rewarded their shareholder with the dividend yield of 3.08% per year. The latest dividend will be ex-date on 23 Jul 2015.

3) Support from ultimate parent company,

Yung Shin Pharmaceutical Industrial Co., which is the listed in

Taiwan stock exchange. 

Refer: http://www.ysp.com.tw/ysp/Invest-Download.aspx?tc=3a (written in Chinese - annual report for parent company)

Refer: http://www.ysp.com.tw/ysp/AboutYSP-Idea.aspx?tc=1a (company website - chinese version)

Refer: http://www.yungshingroup.com/en/category/main.aspx?r=1 (company website - english version)

As per annual report from Yung Shin Pharmaceutical Industrial Co., YSPSAH is a company which mainly focus the business in Southeast Asia. Mostly, the research and development cost will be absorb by another related company called 江蘇德芳醫藥科研有限公司. Hence it created the cost saving to the company as most of the research and development cost will be absorbed by the ultimate parent company, Yung Shin Pharmaceutical Industrial Co..

History of ultimate parent company - Yung Shin Pharmaceutical Industrial Co.

The name YungShin represents the common asset of all YungShin people. In 1952, Mr. Li Tian De, established YungShin pharmacy in Taichung, Taiwan. Dedicated to the goal of producing the best medicine to enhance people's health, the brand marked the beginning of what is now the YungShin Company. 

YungShin has always maintained an association with the color white as a representation of flawlessness and cleanliness. White factory buildings, white uniforms, and white Vespa motorcycles reinforce the theme at YungShin, always projecting an image of cleanliness and purity. This tradition has been carried on for over six decades.

Quality and integrity have always been parts of YungShin’s character. Since the founding of YungShin more than 60 years ago, we have insisted on accurate financial management, and to this day we run an ERP system of SAP to improve cost management and quality control. YungShin strives to be the most trustworthy partner in providing the best solutions for all customer health issues.

YungShin is a conscientious pharmaceutical company, taking care to ensure that all procedures are precise, every product is aimed for perfection, and business and quality standards remain consistent. Integrity is an essential quality for a pharmaceutical company that wishes to instill faith and trust in consumers. 

Compare to peer, YSPYAH only trading at PE13.79, which is lowest among peers. The profit margin stood at 16% which is highest among peers. Although the net cash position is lower than Ahealth, but the company have higher profit margin than Ahealth.

5) Currency gain

31 March 2015 - Currency gain 1.4million - increased EPS by 1sen

31 December 2015 - Currency gain 1.9million - increased EPS by 1.4sen

Total share : 133,250,000 

Although the company only incurred 21% of exports, based on the calculation, the currency gain also contributed a significant EPS for the company. Also, as per latest quarter report, the management stated that the company exports have been increased. Hence with the weakening in ringgit during Apr to Jun, I expected the company will continue enjoyed the currency gain in coming quarters.

6) Expansion and automation program on the

way

During 2014, four new products - anesthetic injection, antidiabetic drug, cough mixture and corticosteroid drug were launched in the general practitioners and hospital segment. Seven new products which included probiotics, immune-enhancer and antibiotics were introduced in the veterinary segment, and jelly bean kids vitamins and new life style products were introduced into the retail market in the over-the-counter segment. Also, ten new Sun Ten Group (traditional medicine) products were launched in both Malaysia and Singapore markets.

Also, 11 pharmaceutical products have been successfully registered in 2014. Total licenses for all products currently stood at 327. Total export licences owned by the Group has reached 1,013.

Additional capital expenditure to acquired new facilities to further upgrade automation in the Bangi plant.

Futher more, renovation work on the new pharmaceutical manufacturing plant in Cikarang, Indonesia is scheduled to be completed in 1st quarter of 2015 and machineries and equipment will be commissioned and expected to be ready for inspection by authorities in 3rd quarter of 2015.

Hence the company increased the product range, number of licenses, increase efficiency of their plant and expansion to Indonesia, the revenue will be increased and the cost will be decreased. In long term, it will significant increased the profit for the company.