Monday, August 24, 2009

Pharma- an attractive long-term stock

Background

Pharmaniaga Berhad ('Pharma') is the largest integrated local healthcare company in Malaysia. Its core businesses are generic pharmaceuticals manufacturing and R&D, warehousing and distribution of pharmaceutical and medical products, sales & marketing as well as hospital equipping.

Recent Financial Results

For 2Q2009 ended 30/6/2009, its net profit increased by 21.9% q-o-q or 35.0% y-o-y to RM17.7 million. Its turnover was 6.2% higher than 1Q2009 but 5.7% lower than 2Q2008.


Table 1: Pharma's 8 quarterly results

From the chart below, we can see that the growth in Pharma's turnover has hit a slow patch over the past 1 year, after a period of strong growth in FY2007 & FY2006. Its net profit has been flattish for the past 2 years, after peaking in 3Q2007.


Chart 1: Pharma's 15 quarterly results

Valuation

Pharma (closed at RM4.40 on Friday) is now trading at a trailing PE of 7.7 times (based on the last 4 quarters' EPS of 57 sen) or at a Price to Book of 1.2 times (based on NTA per share of RM3.74 as at 30/6/2009). At these multiples, Pharma is deemed attractive.

Technical Outlook

Pharma has been in a downtrend for the past 5 years (see the charts below). A break above the RM4.50 level could signal the start of the recovery in its share price. On weakness, it may drift back to the RM4.00 horizontal line.


Chart 2: Pharma's daily chart as at Aug 21, 2009 (Source: Tradesignum)


Chart 3: Pharma's monthly chart as at Aug 21, 2009 (Source: Quickcharts)

Conclusion

Based on attractive valuation, Pharma may be a good stock for long-term investing. It may even be a good trading BUY if the share price were to break above the RM4.50 level.

6 comments:

cykoay said...

Hi Alex,
May I know where do you get all the listed comapanies qtr financial report which u normally put on yr blog?

Alex Lu said...

Hi ahkuih,

Ha.Ha.Ha... I've been asked this question many times. I'm sorry to say that there is no shortcut. You have to open 4 consecutive quarterly results; identify the relevant numbers; and prepare a spreadsheet based on these numbers. It is not easy task.

teh said...

Hi Alex,

Can you comment about BJCORP-LC?is that safe to buy it?

Alex Lu said...

Hi Teh,

BJCorp-LC can be converted to BJCorp ordinary share either by way of 1 unit of BJCorp-LC plus 50 sen or 2 units of BJCorp-LC, in exchange for 1 unit of BJCorp share.

Based strictly on technical analysis, I think BJCorp-LC can be a BUY at RM0.40 while BJCorp share can be a BUY at RM0.80. I have not analyzed the company's accounts, which is a demanding task. If you intend to take a sizable position in this stock, it would be advisable to do so.

Based on the above, I think that it is alright to take a small position in BJCorp-LC now since it's quite near to the support of RM0.40.

teh said...

Hi Alex,

So is safe since it can be convert to bjcorp.tx a alot.

Nerdie said...

Hi,
Can Berjaya Corp go up as high as RM2? What do you think VT's strategy by taking Cosway to Hong Kong? Is it better to buy Bjcorp-LC for capital appreciation in mid term or buy Bjcorp for divident?