ACE Market firm Bioalpha Holdings Bhd, which is targeting a Main Board listing, is counting on its exclusive tie-up with national cooperative organisation Angkasa to propel its domestic earnings in the coming years alongside the positive breakthroughs that it has made in overseas markets.
Reflecting its outsized ambitions for a small cap company, Bioalpha has already established a diverse set of businesses in the span of two years since its 2015 listing. Among others, the company co-manages the Constant chain of pharmacies, distributes its own brand of healthcare products, and cultivates its own plants for extraction purposes.
In an interview, Bioalpha’s managing director William Hon Tian Kok highlighted its business partnership with Angkasa as a fruitful and highly rewarding. The Angkasa counts a whopping 12,000 co-operatives as members with a total client base of eight million. The biggest co-operatives under this umbrella include the Royal Malaysia Police co-operative, Koperasi Permodalan Felda (KPF), and Koperasi Petronas (Kopetro).
“Our focus is on Constant. We aim to have 30 outlets by year-end from 15 currently and the greater number of outlets will bring better turnover. The next opening will be in Kota Bharu and Desa Jerteh in Terengganu,” he said.
The company has moved away from the saturated Klang Valley pharmacy chain market and into other states. The concentration of civil servants and enforcement officers in areas outside Klang Valley is among the prime targets for Bioalpha’s businesses thanks to the access provided by Angkasa.
Bioalpha and Angkasa’s 70:30 joint venture company, Alphacare Sdn Bhd, is involved in the management of Constant Pharmacies. The cost of opening the outlets is borne by franchisees while Alphacare charges a fixed management fee from each outlet’s gross income.
“This joint venture gives us access to Angkasa members all over the country. We have already rolled out a loyalty programme to recruit them as our pharmacy members,” he said.
The members are eligible to purchase the products either at a special price or through a financing scheme arranged by some of the co-operatives which is paid for via monthly wage deductions, Hon explained.
This seems to have played a part in spurring the group’s domestic sales. Inclusive of the earnings of its pharmacy operations, Bioalpha’s domestic revenue base grew by 250% to RM21.21mil in its financial year ended Dec 31, 2016 (FY16) from just RM6.26mil a year ago.
Its latest venture is the creation of a franchise business via a virtual pharmacy called e-Constant which will also be managed by Alphacare. It lets customers purchase Bioalpha’s products online and register as referral agents, through which they will be rewarded with cash points for each successful referral sale. The points can then be used for their next purchase of products.
In a recent note, CIMB Research cited the arrangement as a win-win deal for Bioalpha and Angkasa. Co-operative members are able to build individual businesses via referrals, while at the same time Bioalpha gets to boost its pharmaceutical and home brand sales, it said. The research house, which currently has not imputed the potential earnings from e-Constant, has a target price of 37 sen for Bioalpha’s shares.
The company can count on a solid revenue mix to insulate it from potential downturns in the domestic market. Overseas earnings currently contribute about 45% to the group’s revenue base. Hon expects the revenue mix to be closer to 50:50 by year-end.
While the “China angle” is an often-cited catalyst among small cap firms in Bursa Malaysia, Bioalpha has distinguished itself with real and tangible earnings contribution from the world’s most populous nation. In fact, revenue from China now accounts for nearly a third of the company’s revenue base as at FY16.
“Our customers in China re-sell our products the conventional way, that it through outlets and online marketplaces. If you browse through listing on Chinese sites like Tmall and Taobao, you will see a lot of Malaysian healthcare products for sale. It is a big growth market,” he said,
Elsewhere, the group currently sells seven products in Indonesia and hopes to get another six approved by regulators by this year. By having its own factory in Pekan, Riau province, Bioalpha is able to expedite the approval process for its products compared to importing it from Malaysia, Hon said.
It may come as a surprise that the company’s shares have actually underperformed the broader market’s recent advance. Despite its 30% advance year to date, the stock is is down slightly on a year-on-year basis. In comparison, the FBM KLCI Small Cap Index has advanced % to date.
There is also the matter of the group’s high earnings multiple which may put off some investors. It currently carries a price earnings ratio of 20 times according to Bloomberg data, though the figure could also represent investors’ enthusiam over its consistently high profit
Guys. Make decision by urself based on all the news surround biohldg. No need to care about those who didnt do research before comment. They just trying to spread negative news and also have a sour grape mind. We believe bioalpha is able to go into main market by this year or next year. We should believe in the directors
And also, a lot of stock also risen from penny stock. Now you think bioalpha is a penny stock because you didnt see the hidden gem in this company. Once you found the gem. It is too late for you to buy with such cheap price.
Come come who think that this is a lousy stock, now u can throw out ur share, then I buy it. Don regret, if this stock like a train shoot fast to north.
Just know the founder or MD background Hon William, he is qualified accountant. I always believed that the person as a accountant will lead the company become more success, in term of cost control, management and future grow.
In a recent note, CIMB Research cited the arrangement as a win-win deal for Bioalpha and Angkasa. Co-operative members are able to build individual businesses via referrals, while at the same time Bioalpha gets to boost its pharmaceutical and home brand sales, it said. The research house, which currently has not imputed the potential earnings from e-Constant, has a target price of 37 sen for Bioalpha’s shares.
New IPO: Building management systems (BMS), solar thermal systems and energy-saving services provider, Solar District Cooling Bhd aims to list on the Ace Market!
This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
tiger86
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Posted by tiger86 > 2017-04-17 14:09 | Report Abuse
Mother will fly soon.Good Luck!!