Hyphens Pharma - RHB Invest 2020-05-15: Numbers Improve During Pandemic; Stay BUY


Hyphens Pharma - Numbers Improve During Pandemic; Stay BUY

  • Hyphens Pharma’s 1Q20 NPAT surged 48.6% y-o-y to SGD2.1m on higher revenue of SGD31.4m (+16.4% y-o-y), largely driven by growth in proprietary brands and its virtual medical hypermart.
  • Maintain BUY, DCF-based SGD0.27 Target Price, 12% upside with c.4% FY20F yield.
  • While we see resilience in its business, we believe that the group will experience some impact in 2Q20 due to the Government-mandated “circuit breaker”, and remain cautious on how the COVID-19 situation will pan out.

1Q20 revenue and earnings comprise 25% and 32% of our full-year forecasts.

  • Hyphens Pharma (SGX:1J5)'s 1Q20 gross and net margins stood at 34.7% and 6.8%, vs our previous estimates of 34.1% and 5.3% (annualised). The extension of its Ceradan® brand products to the retail sales channel, coupled with the launch of Ceredan® Advanced last year, contributed significantly to the growth in proprietary brands’ revenue.
  • Hyphens Pharma's 1Q20 revenue grew by 35.9% y-o-y to SGD4.6m. Nutritional supplements – its Ocean Health brand – also clocked higher sales, as consumers bought health supplements to improve immunity against COVID-19.
  • Similarly, the pandemic has driven sales growth in the company’s medical hypermart and digital segment, due to the uptick in online order volumes, as well as the higher demand for personal protective equipment. Revenue for this segment expanded by 17% y-o-y to SGD11.4m. We see the higher revenue as sustainable, as digitalisation will be an important part of the healthcare industry going forward.
  • Revenue from specialty pharmaceutical principals grew 11.2% y-o-y to SGD15.4m, due to a combination of a low base in 1Q19, as well as higher demand for certain products. To further drive this segment’s revenue, Hyphens Pharma is also planning to add new principals this year.

Hyphens Pharma's war chest of SGD27.1m enables it to tide through uncertainties.

  • Hyphens Pharma’s 1Q20 cash flow from operations was at SGD2.2m, bringing net cash to SGD27.1m as at end-1Q20. It is committed to maintaining its dividend policy of paying at least 30% of PATMI. With a war chest of SGD27.1m, Hyphens Pharma is also in an excellent position to seize any opportunities as and when they arise.
  • Due to its strong balance sheet, the group is also committing SGD150,000 to support frontline healthcare professionals in the region, as well as to donate to marginalised communities affected by COVID-19.

Maintain BUY.

Lee Cai Ling RHB Securities Research | Jarick Seet RHB Invest | https://www.rhbinvest.com.sg/ 2020-05-15
SGX Stock Analyst Report BUY MAINTAIN BUY 0.270 SAME 0.270