Bioalpha Holdings Bhd
(March 18, 40.5 sen)
Maintain add with an unchanged target price (TP) of 65 sen: We recently organised a meeting between a small group of our institutional clients and Bioalpha Holdings Bhd’s managing director William Hon and chief financial officer Goh Siow Cheng. Most of the clients were meeting the management for the first time. There were no surprises at the meeting.
Management explained that the company’s pharmacy business is based on a franchise model. Investors keen to take up Bioalpha’s pharmacy franchise (under the Constant brand) would be able to either acquire an existing pharmacy from the company or open a new pharmacy at another location.
Bioalpha will manage these pharmacies and the company will receive management fees, based on a certain percentage of the profit. In addition, Bioalpha gets top-shelf space at the pharmacies for its house products, which would be promoted by the staff. This strategy is paying off as sales of its house products at Constant pharmacies have increased since the start of the year.
Bioalpha currently has 13 Constant pharmacies under its umbrella, all in the Klang Valley. Management shared that there are investors keen to open new Constant pharmacies outside the Klang Valley. This is positive for Bioalpha as it should help the company sell its house products outside the Klang Valley. Bioalpha is also launching its e-commerce platform this month (www.constant.com.my). Products will be sold in ringgit, for now. We have not assumed potential earnings from this e-commerce platform.
We maintain our “add” recommendation and TP for the stock, based on a 20% discount to our financial year 2017 target price-earnings ratio of 25 times for the consumer sector; the discount to reflect its small market cap. Potential rerating catalysts include strong export sales and further development in its joint venture with MyAngkasa Holdings Sdn Bhd. — CIMB Research, March 17
BIOHLDG (0179) - Bioalpha to launch e-commerce platform this month
http://www.theedgemarkets.com/my/article/bioalpha-launch-e-commerce-platform-month
