PHARMANIAGA'S CONTRACT EXTENSION TO BENEFIT THE GROUP -- HLIB
KUALA LUMPUR, May 19 (Bernama) --The extension of Pharmaniaga Bhd’s contract with the Ministry of Health (MoH) is expected to be positive for the group as it will continue to provide earnings visibility for another 10 years with the renewal of the concession agreement.
In a note today, Hong Leong Investment Bank (HLIB) said it expects Pharmaniaga to make a formal announcement by June as the existing concession agreement extension will expire by then.
“Recently, Health Minister Dr Zaliha Mustafa indicated that the MoH will continue its concession agreement with Pharmaniaga for the provision of medicine and medical supplies to MoH facilities, despite Pharmaniaga’s PN17 status, and that the concession will be extended for another 10 years," it said.
However, HLIB has maintained its ‘sell’ call for the group’s shares, with a lower target price of 30 sen.
"Although the renewal of the concession agreement will provide earnings clarity, we are keeping our ‘sell’ call as there are pressing concerns that could impact Pharmaniaga negatively, namely its PN17 status, the need to secure funding for its working capital and higher financing cost from rising overnight policy rate," it said.
At 11.03 am, Pharmaniaga’s share price eased by one sen to 37 sen, with 612,300 shares traded.
-- BERNAMA
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