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'Add' Hyphens Pharma as it moves on to its next phase of growth

Samantha Chiew
·2-min read

CGS-CIMB Research is betting on Hyphens Pharma's next phase of growth.

CGS-CIMB Research is reiterating its “add” recommendation on Hyphens Pharma International with an increased target price of 39 cents from 36 cents previously, as analysts Tay Wee Kuang and Izabella Tan are positive on the group’s latest 1HFY2022 ended results and is upbeat on its prospects for its “next phase of growth”.

To recap, Hyphens Pharma’s 1HFY2022 saw growth in all segments, with overall revenue coming in at $80.7 million, some 26.5% higher y-o-y, ahead of the analysts’ 55.6% growth for FY2022.

All three segments observed y-o-y revenue growth, with specialty pharma principals and proprietary brands growing significantly at 44.7% y-o-y and 15.9% y-o- to $48.2 million and $10.8 million, respectively.

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Better operating leverage also led to a 44.6% higher y-o-y net profit of $6.2 million, exceeding expectations at 76.8% of the analysts’ 76.8% FY2022 estimates.

Meanwhile, the Tay and Tan are in the view that the group is well positioned for its next phase of growth. It is already making headways to grow its proprietary brands.

The launch of the group’s Omega-3 in Vietnam and D-Vita in Malaysia laid the groundwork for growth of brands such as Ocean Health and Ceradan regionally, although the analysts are aware that brand-building could take some time.

“More product launches are expected for the rest of FY2022 in regional markets, with crossing the hurdle of product registrations an important milestone that indicates the start of sales generation in new markets,” writes Tay and Tan in their Aug 15 report.

Separately, Hyphens Pharma’s distributorship with principal Biosensors International Technologies is expected to lapse by end-December this year. The Biosensors portfolio has decreased in revenue contribution over time from 17% of FY2017 revenue to just 6% (or $4.8 million) of 1HFY2022 revenue.

According to management, the cardiology specialisation has been a laggard and the group intends to exit the specialisation with this lapse. “We also understand from management that no other major distributorship contracts are due for expiry in the near term,” adds the analysts.

Overall, the analysts see growth opportunities for the group. They say: “We think Hyphens Pharma can sustain its revenue growth with an expanded portfolio, by tapping on levers such as introducing existing products into new markets, as well as potential product/business acquisitions.”

As at 2.30pm, shares in Hyphens Pharma are trading 1.59% higher at 32 cents, giving it a FY2022 P/E of 8.67x with a dividend yield of 3.4%.

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