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Broker's take: RHB initiates coverage on 'undervalued, under-covered' Hyphens Pharma with 'buy'

RHB Research Institute has initiated coverage on Hyphens Pharma with a "buy" and a target price of S$0.25, believing that the company's speciality pharma principals and proprietary brands segments are equipped for growth in the near term. 

The research house added that the market is currently undervaluing the group's potential.

As at 4.15pm, shares in the pharmaceutical and consumer healthcare group, which has a presence in South-east Asia, were trading 0.4 Singapore cent or 2 per cent higher at 20 cents.

RHB's Jerrick Seet and Lee Cai Ling noted that Hyphens has been recording increases in revenue for most products in its pharma principals division, particularly in Vietnam, where it is expected to grow its presence by 5-8 per cent in the next three years.

The analysts expect "growth momentum to continue in the near term, as it continuously reaches out to existing and prospective buyers" in existing and new markets.

The group launched five products in 2018, and has a few more in the pipeline for 2019. Of the lot, two dermatological products – Ceradan Advanced and TDF Fairence T-Complex – are pending commercialisation.

"We think the introduction of the former is something to look forward to this year. Upon their launch, some existing Ceradan brand products may be marketed through retail pharmacies, making them easier for consumers to reach," the analysts said.

These products are currently sold through hospitals and clinics.

RHB estimates sales from Hyphen’s proprietary brands segment to hit S$24.4 million by FY2021, from S$13 million in FY2018.

Key risks to RHB's recommendation include unsuccessful product registrations, reliance on relationships with brand principals and foreign exchange fluctuations.