DPHARMA (7148) DUOPHARMA BIOTECH BHD gets premium valuation on vaccine development
PETALING JAYA: Duopharma Biotech Bhd has been upgraded to a buy from a sell by RHB Research, given the increased clarity on its chances to participate in vaccine rolloutss in the country.
The research house also noted that its human insulin contract had also been extended.
Its rating is now a buy with a new discounted cashflow-derived target price of RM4 from RM3.30, which is at a 2% yield.
“After a valuation rollover – 40.7 times the financial year 2022 (FY22) forecast price-to-earnings ratio (PER) which is close to +3 standard deviation and beta adjustment, we have increased our target price, ” RHB Research said. “The premium valuation is justified due to its high chance of participating in Malaysia’s vaccination programme, ” it added.
RHB Research also noted that the company also has a stable earnings outlook as 50% of its revenue is from the government while the recent contract extension for human insulin is positive due to increased earnings visibility.
This follows reports which stated that Duopharma could be the next to distribute a vaccine as it was revealed that it had been in talks with a Russian vaccine candidate.
“As Duopharma has the fill-and-finish capacity of 6m vials or 60 million doses per year, we believe that there is a high chance of it participating in Malaysia’s Covid-19 vaccination programme, ” RHB Research said.
Meanwhile, RHB Research said Duopharma had also disclosed that the remaining value of products, that is yet to be drawn down by the government stands at RM69.1mil.
“We are positive on this due to the higher FY21 revenue visibility, although we have already imputed this into our earnings forecasts previously, ” the research house said.
RHB Research also said the value of the human insulin contract that had been extended by a year from the government is RM19.6mil. The effective date of this contract extension will be from Dec 2,2020 to Dec 1,2021.
It also said it was positive on the news that Duopharma will become a member of the Dow Jones Islamic Market Malaysia Titans 25 Index since it will increase its visibility to syariah funds.
https://www.thestar.com.my/business/business-news/2021/01/15/duopharma-biotech-gets-premium-valuation-on-vaccine-development
