BIMB Research starts coverage of Hovid

10 August 2015

KUALA LUMPUR: BIMB Securities Research has started coverage of Hovid, one of Malaysia’s leading pharmaceutical companies, with a target price of 49 sen and a Hold recommendation.

It said on Monday the 49 sen target price was based on the weighted average local peers’ price-to-earnings ratio (PER) of 15 times over FY16 EPS.

Hovid produces ethical drugs (generic drugs), dietary supplements and consumer products while sold locally and also exported to over 50 countries.

BIMB Research said the growing world’s population and rising healthcare awareness have given rise to a rapidly expanding healthcare industry.

“This provides Hovid with a solid platform to thrive on. We initiate coverage on the stock with a target price of 49 sen,” it said.

BIMB Research said Hovid’s expansion programme is on track with the completion of its new R&D centre in Penang.

A new manufacturing plant is also being built in Chemor, Perak and the consolidation of its seven warehouses is in progress. Timely completion of these projects would greatly support the growth of the company’s business.

“Revenue trend for the past three years showed positive growth with a CAGR of 6.1%. On the other hand, earnings reflected fluctuating fortunes with a growth rate of 24.6% on-year for FY13 but -11.0% for FY14.

“However, with higher revenue anticipated for FY15 and FY16, it is projected that earnings will experience positive growth for both financial years. We anticipate earnings to increase to RM21.3mil (+17.6%) and RM25.7mil (+20.9%) in FY15 and FY16 respectively,” it said.

The research house said Hovid being a generic drug manufacturer has vast market and revenue potential as the company is all set to exploit the space when RM422bil worth of innovator drug patent expires within the next 10 years.


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