HLIB Research

PP 9484/12/2012 (031413)

Pharmaniaga Bhd (BUY , EPS )

15 May 2014
Price Target: RM5.30 ()
Share Price: RM4.70

INDUSTRY: NEUTRAL
EARNINGS EVALUATION

1Q14 Results In Line

Results

Deviations
Dividends

Highlights

Catalysts

Risks

Forecasts
Rating

Valuation

Page 1 of 5

1Q14 turnover of RM468.7m was translated into core net

profit of RM28.0m, accounted for 30% and 33% of HLIB and
consensus full year estimates, respectively.
This is regarded as within expectations because 1Q is
traditionally a strong quarter within its financial year (1Q13
core net profit of RM30.7m accounted for 40% of FY13).
One-off adjustments:

Tan J Young
jytan@hlib.hongleong.com.my
(603) 2168 1082
KLCI
Expected share price return
Expected dividend return
Expected total return

RMk

Write-offs

Impairment

FOREX

Tax

Total

Share price

1Q13
4Q13
1Q14

8,183
4,580
1,870

0
5,000
0

-5
776
-106

-2,253
-2,100
0

5,925
8,256
1,764

6.0

In line.
Declared first single tier dividend of 4.0 sen per share (1Q13:
3.41 sen) with ex-date of 29th May.
Committed to at least sustain FY13s dividend to be
distributed quarterly.
1Q14 turnover weakened by 6.3% yoy and 17.5% qoq to
RM468.7m due to reduced demand from both the
concession and non-concession businesses.
1Q14 sales ratio was relatively unchanged with concession:
non-concession: Indonesia business at 59%: 20%: 21% vs.
FY13s 58%: 21%: 21%, while it continues to reduce
dependency on concession business progressively.
EBIT margin gained 2.2-ppt to 8.4% as it graduated from the
amortization of novation agreement in Jan 2014 which
amounted to ~RM2.3m per month.
Logistics and distribution division is set to generate a steady
revenue stream while maintaining cost optimization
measures to sustain earnings growth, though this may be
moderated by the implementation of Pharmacy Information
System (PhIS). Manufacturing division remains steadfast in
R&D with a view to expand product portfolio.
The recent closure of ERRITA deal is expected to have a
positive impact as it strives to expand its earnings base and
pursue viable growth opportunities. We expect ERRITA to
contribute positively over the long term as new product
registration process in Indonesia would require up to 2 years.
With regard to the recent frenzied mega M&A among global
pharmaceutical players (involving GSK and Novartis, Pfizer
and AstraZeneca, Merck and Bayer, etc), Pharmaniaga sees
neutral impact to Malaysian market.
Gaining market share in non-concession and private sectors,
synergistic benefits from acquisition, favorable FOREX,
continuous effective operational strategy.
Political / regulatory / competitive / FOREX risks, failure /
delay in drug delivery under CA, compliance to production
standards / contamination and drug patent disputes.
Maintained.
BUY , TP: RM5.30
Positives - Synergy from acquisition, quarterly dividend,
secured business outlook thanks to CA.
Negatives - FOREX, high level of stock and gearing.
Reiterate BUY with unchanged fair value of RM5.30 based
on FY15 P/E multiple of 14.5x, on par with US peers.

1879.2
13.2%
3.8%
17.0%

RM

Pts
1960

1860
5.0
1760
4.0
1660
PHRM (LHS)
3.0
May-13

KLCI (RHS)
1560

Aug-13

Oct-13

Dec-13

Mar-14

Information
Bloomberg ticker
Bursa code
Issued shares (m)
Market cap (RM m)
3-mth avg. volume (000)
Price Performance
Absolute
Relative

PHRM MK
7081
259
1,217
210
1M
8.5
7.0

3M
6.8
3.3

Major Shareholders
Boustead Holdings
LTAT

12M
14.2
8.7

56.4%
12.4%

Summary Earnings Table

FYE 31 Dec
2013A 2014E 2015E
(RMm)
Revenue
1,947 2,024 2,098
EBITDA
170
210
213
Pre-tax Profit
93
156
160
PATAMI
55
93
95
Adj. PATAMI
77
93
95
Rep. EPS sen
21.3
35.8
36.6
Adj. EPS sen
29.6
35.8
36.6
Net DPS sen
16.0
17.9
18.3
Net DY (%)
3.4
3.8
3.9
P/E (x)
22.0
13.1
12.8
P/BV (x)
2.5
2.3
2.1
EV/EBITDA (x)
8.2
6.7
6.5
Net D/E %
0.4
0.4
0.3
ROA %
0.1
0.1
0.1
ROE %
0.2
0.2
0.2
HLIB

2016E
2,166
215
162
96
96
37.0
37.0
18.5
3.9
12.7
1.9
6.3
0.3
0.1
0.1

15 May 2014

HLIB Research | Pharmaniaga Berhad

Figure #1

www.hlebroking.com

Pharmaniagas 1Q14 Results

RMm
Revenue

1Q13
500.3

4Q13
567.9

1Q14
468.7

YoY (%)
-6.3

QoQ (%)
-17.5

EBITDA
EBITDA Margin %
EBIT

54.4
10.9%
40.7

52.2
9.2%
35.3

51.5
11.0%
39.5

-5.3

-1.4

-3.0

11.9

PBT
Reported PAT

36.9
25.2

33.0
21.3

38.2
26.6

3.3
5.9

15.6
25.3

PATAMI
Normalized PATAMI
Reported EPS (sen)
Normalized EPS (sen)

24.8
30.7
9.6
11.9

20.8
29.1
8.0
11.2

26.2
28.0
10.1
10.8

5.8
-8.8
5.8
-8.8

26.0
-3.7
26.0
-3.7

Comments
Lower largely due to reduced demand from both the
concession and non-concession businesses.
Filtered down from sales, distorted by one-offs.
Improvement due to the end of novation agreement
amortization in Jan 2014 which amounted to RM2.3m per
month.
Filtered down from EBIT.
Filtered down from PBT.
After adjustments of one-off losses / provisions.
Filtered down from normalized PATAMI.

Company Data

Figure #2

1Q14 Results vs. HLIB and Consensus FY14 Estimates

RMm

1Q14

Revenue
EBITDA

468.7
51.5

HLIB FY14
Est.
2,024.0
210.0

EBITDA Margin %

Actual vs
HLIB (%)
23
25

Consensus
FY14
2,065.5
193.0

Actual vs
Consensus (%)
23
27

11.0%

10.4%

EBIT
PBT

39.5
38.2

169.0
156.0

23
24

153.0
136.0

26
28

Reported PAT

26.6

95.0

28

86.0

31

PATAMI
Normalized PATAMI

26.2
28.0

93.0
93.0

28
30

86.0
86.0

30
33

Reported EPS (sen)

10.1

36.0

28

33.0

31

Adjusted EPS (sen)

10.8

36.0

30

33.0

33

Comments
Slightly below expectations.
Distorted by one-offs amounted to RM1.764m.

9.3%

In line.
In line.

Company Data, HLIB, Bloomberg

Figure #3

HLIB Forecasts vs. Consensus

RMm

FY14E
Consensus
86.0
33.0

HLIB
93.0
36.0

Net Profit
EPS (sen)

%
+8.1
+9.1

FY15E
Consensus
91.0
35.5

HLIB
95.0
37.0

%
+4.4
+4.2

Bloomberg, HLIB

Figure #4

Pharmaniagas Performance by Divisions

RMm

3Q12

4Q12

1Q13

2Q13

3Q13

4Q13

1Q14

Logistics and distribution

Total revenue
PBT

428.8
9.1

483.6
2.0

501.4
12.6

438.3
1.5

440.9
-3.4

568.2
10.7

468.9
14.8

Manufacturing
Total revenue
PBT

81.4
22.4

76.0
9.3

66.8
5.9

84.4
14.9

75.2
14.9

95.2
24.7

90.8
25.4

Company Data

Page 2 of 5

15 May 2014

HLIB Research | Pharmaniaga Berhad

Figure #5

www.hlebroking.com

Regional Peers Comparison

Market Cap (m)
(Local)
(USD)

Company

FYE

Price

Malaysia
Pharmaniaga (PHRM)
Apex Healthcare
YSP Southeast Asia
Avg (excl PHRM)

Dec
Dec
Dec

MYR 4.70
MYR 4.70
MYR 1.66

1,216.7
440.5
220.9

US
Teva Pharmaceutical
Mylan
Perrigo
Hospira
Avg

Dec
Dec
Jun
Dec

USD 51.20
USD 47.57
USD 131.31
USD 47.92

48,626.3
17,778.4
17,569.3
8,009.6

P/E (x)

P/B (x)

2014

2015

2014

2015

Gross DY (%)
2014

378.0
136.8
68.6

14.2
12.7
N/A
12.7

13.2
N/A
N/A
N/A

2.3
1.7
N/A
1.7

2.1
N/A
N/A
N/A

3.8
2.6
N/A
2.6

48,626.3
17,778.4
17,569.3
8,009.6

10.9
14.0
21.0
21.9
17.0

10.7
12.2
17.1
20.7
15.2

1.9
5.2
3.0
2.5
3.1

1.7
3.5
2.7
2.2
2.6

2.7
N/A
0.3
N/A
0.7

Bloomberg, HLIB

Page 3 of 5

15 May 2014

HLIB Research | Pharmaniaga Berhad

www.hlebroking.com

Pharmaniaga Bhd (BUY, PT: RM5.30, CP: RM4.70)

Income Statement
FYE 31 Dec (RMm)
2012
Revenue
1,812
COGS
-1,642
EBITDA
171
D&A
-54
EBIT
117
Net Interest Income
-13
Associates
0
Exceptionals
0
PBT
103
Tax
-40
PAT
63
Minority Interests
-1

2013
1,947
-1,776
170
-65
106
-13
0
0
93
-36
57
-2

2014E
2,024
-1,814
210
-41
169
-13
0
0
156
-61
95
-3

2015E
2,098
-1,886
213
-40
173
-13
0
0
160
-62
97
-3

2016E
2,166
-1,951
215
-42
173
-12
0
0
162
-63
99
-3

62
83

55
77

93
93

95
95

96
96

259
24
32
32

259
21
30
30

259
36
36
36

259
37
37
37

259
37
37
37

2012
35
218
465
0
340
151
15
1,223
306
341
0
88
735
472
16
488
1,223

2013
33
169
411
0
353
126
22
1,113
388
200
0
21
610
488
16
503
1,113

2014E
27
176
419
0
400
134
22
1,177
404
200
0
21
625
534
18
552
1,177

2015E
61
182
436
0
398
144
22
1,242
419
200
0
21
640
581
21
602
1,242

2016E
96
188
451
1
397
153
21
1,306
432
200
0
21
653
629
24
653
1,306

Cashflow Analysis
FYE 31 Dec (RMm)
2012
EBITDA
117
Tax Paid
-36
Working Capital Chgs
-112
Other
48
Operating CF
17
FCF
-81
CAPEX
-49
Asset Sales
0
Acquisitions
-49
Other
-30
Investing CF
-127
Dividends
-61
Debt Chgs
153
Other
-2
Financing CF
89
Net Cashflow
-21

2013
106
-34
185
-7
250
192
-59
0
0
-21
-80
-37
-141
7
-171
0

2014E
169
-61
0
28
136
40
-96
0
0
0
-96
-46
0
0
-46
-6

2015E
173
-62
-8
27
129
81
-48
0
0
0
-48
-47
0
0
-47
34

2016E
173
-63
-7
30
133
83
-49
0
0
0
-49
-48
0
0
-48
35

PATAMI
Adj PATAMI
Basic Shares (m)
Rep. EPS sen
Adj. EPS sen
Adj. FD EPS sen
Balance Sheet
FYE 31 Dec (RMm)
Cash
Receivables
Inventories
Investments
Fixed Assets
Intangibles
Other Assets
Ttl Assets
Payables
Short Term Debt
Long Term Debt
Other Liabilities
Ttl Liab
Shareholders' Funds
Minority Interests
Total S/H Equity
Ttl Liab&S/H Funds

Page 4 of 5

Quarterly Financial Summary

FYE 31 Dec (RMm)
1Q13
2Q13
Revenue
500.3
437.6
COGS
-446.0
-407.1
EBITDA
54.4
30.5
D&A
-13.7
-17.9
EBIT
40.7
12.7
Net Interest Income
-3.8
-3.1
Associates
0.0
0.0
Exceptionals
0.0
0.0
PBT
36.9
9.6
Tax
-11.8
-3.4
PAT
25.2
6.2
Minority Interests
0.4
0.3
PATAMI
Adj PATAMI

3Q13
440.8
-407.9
32.9
-16.2
16.7
-3.3
0.0
0.0
13.5
-9.3
4.2
0.4

4Q13
567.9
-515.6
52.2
-16.9
35.3
-3.3
0.0
1.0
33.0
-11.7
21.3
0.5

1Q14
468.7
-417.2
51.5
-12.0
39.5
-3.3
0.0
2.0
38.2
-11.5
26.6
0.4

24.8
30.7

5.9
11.4

3.8
5.6

20.8
29.1

26.2
28.0

258.9
9.6
11.9
11.9

258.9
2.3
4.4
4.4

258.9
1.4
2.2
2.2

258.9
8.0
11.2
11.2

258.9
10.1
10.8
10.8

Valuation Ratios
FYE 31 Dec (RMm)
2012
PER (x)
19.7
Adj. PER (x)
14.6
FD PER (x)
14.6
Net DPS sen
15.9
Net DY (%)
3.4
Book/share sen
182.3
P/Book (x)
2.6
FCF/share sen
-31.3
FCF yield (%)
-6.7
Mkt Cap
1,217
Net Cash(Debt)
-306
EV
1,523
EV/EBITDA (x)
8.9
ROE (%)
17.1
Current Ratio (x)
1.0
Quick Ratio (x)
0.4
Interest Cover (x)
7.8

2013
22.0
15.9
15.9
16.0
3.4
188.4
2.5
74.0
15.8
1,217
-167
1,384
8.1
15.3
1.1
0.4
7.2

2014E
13.1
13.1
13.1
17.9
3.8
206.3
2.3
15.6
3.3
1,217
-173
1,390
6.6
16.8
1.0
0.4
11.5

2015E
12.8
12.8
12.8
18.3
3.9
224.6
2.1
31.4
6.7
1,217
-139
1,356
6.4
15.7
1.1
0.4
11.8

2016E
12.7
12.7
12.7
18.5
3.9
243.1
1.9
32.2
6.8
1,217
-104
1,321
6.1
14.7
1.2
0.5
11.8

Other Ratios
FYE 31 Dec (RMm)
Sales Growth (%)
EBITDA Growth (%)
EBIT Growth (%)
PBT Growth (%)
Net Profit Growth (%)
EBITDA Margin (%)
EBIT Margin (%)
PBT Margin (%)
Net Profit Margin (%)
Net Debt/Equity (%)
CAPEX/Sales (%)

2013
7.4
-0.2
-9.4
-10.0
-10.5
8.8
5.4
4.8
3.9
39.7
3.0

2014E
4.0
23.1
59.7
67.9
67.9
10.4
8.3
7.7
4.6
36.2
4.7

2015E
3.7
1.3
2.2
2.2
2.2
10.1
8.2
7.6
4.5
33.2
2.3

2016E
3.2
1.1
0.4
1.3
1.3
9.9
8.0
7.5
4.4
30.6
2.3

Basic Shares (m)

Rep. EPS sen
Adj. EPS sen
Adj. FD EPS sen

2012
19.2
75.8
56.3
41.2
18.3
9.4
6.4
5.7
4.6
69.9
2.7

15 May 2014

HLIB Research | Pharmaniaga Berhad

www.hlebroking.com

Disclaimer
The information contained in this report is based on data obtained from sources believed to be
reliable. However, the data and/or sources have not been independently verified and as such,
no representation, express or implied, are made as to the accuracy, adequacy, completeness or
reliability of the info or opinions in the report.
Accordingly, neither Hong Leong Investment Bank Berhad nor any of its related companies and
associates nor person connected to it accept any liability whatsoever for any direct, indirect or
consequential losses (including loss of profits) or damages that may arise from the use or
reliance on the info or opinions in this publication.
Any information, opinions or recommendations contained herein are subject to change at any
time without prior notice. Hong Leong Investment Bank Berhad has no obligation to update its
opinion or the information in this report.
Investors are advised to make their own independent evaluation of the info contained in this
report and seek independent financial, legal or other advice regarding the appropriateness of
investing in any securites or the investment strategies discussed or recommended in this report.
Nothing in this report constitutes investment, legal, accounting or tax advice or a representation
that any investment or strategy is suitable or appropriate to your individual circumstances or
otherwise represent a personal recommndation to you.
Under no circumstances should this report be considered as an offer to sell or a solicitation of
any offer to buy any securities referred to herein.
Hong Leong Investment Bank Berhad and its related companies, their associates, directors,
connected parties and/or employeees may, from time to time, own, have positions or be
materially interested in any securities mentioned herein or any securites related thereto, and
may further act as market maker or have assumed underwriting commitment or deal with such
securities and provide advisory, investment or other services for or do business with any
companies or entities mentioned in this report. In reviewing the report, investors should be
aware that any or all of the foregoing among other things, may give rise to real or potential
conflict of interests.
This research report is being supplied to you on a strictly confidential basis solely for your
information and is made strictly on the basis that it will remain confidential. All materials
presented in this report, unless specifically indicated otherwise, is under copyright to Hong
Leong Investment Bank Berhad. This research report and its contents may not be reproduced,
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person or published in whole or in part, or altered in any way, for any purpose.
This report may provide the addresses of, or contain hyperlinks to, websites. Hong Leong
Investment Bank Berhad takes no responsibility for the content contained therein. Such
addresses or hyperlinks (including addresses or hyperlinks to Hong Leong Investment Bank
Berhad own website material) are provided solely for your convenience. The information and the
content of the linked site do not in any way form part of this report. Accessing such website or
following such link through the report or Hong Leong Investment Bank Berhad website shall be
at your own risk.
1. As of 15 May 2014, Hong Leong Investment Bank Berhad has proprietary interest in the
following securities covered in this report:
(a) -.
2. As of 15 May 2014, the analyst, Tan J Young who prepared this report, has interest in the
following securities covered in this report:
(a) -.

Published & Printed by

Hong Leong Investment Bank

Berhad (10209-W)
Level 23, Menara HLA
No. 3, Jalan Kia Peng
50450 Kuala Lumpur
Tel 603 2168 1168 / 603 2710 1168
Fax 603 2161 3880

Equity rating definitions

BUY
TRADING BUY
HOLD
TRADING SELL
SELL
NOT RATED

Positive recommendation of stock under coverage. Expected absolute return of more than +10% over 12-months, with low risk of sustained downside.
Positive recommendation of stock not under coverage. Expected absolute return of more than +10% over 6-months. Situational or arbitrage trading opportunity.
Neutral recommendation of stock under coverage. Expected absolute return between -10% and +10% over 12-months, with low risk of sustained downside.
Negative recommendation of stock not under coverage. Expected absolute return of less than -10% over 6-months. Situational or arbitrage trading opportunity.
Negative recommendation of stock under coverage. High risk of negative absolute return of more than -10% over 12-months.
No research coverage, and report is intended purely for informational purposes.

Industry rating definitions

OVERWEIGHT
NEUTRAL
UNDERWEIGHT

Page 5 of 5

The sector, based on weighted market capitalization, is expected to have absolute return of more than +5% over 12-months.
The sector, based on weighted market capitalization, is expected to have absolute return between 5% and +5% over 12-months.
The sector, based on weighted market capitalization, is expected to have absolute return of less than 5% over 12-months.

15 May 2014