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HYPHENS PHARMA: IS THIS PHARMA COMPANY UNDERVALUED? (Guest Post)

HYPHENS PHARMA: IS THIS PHARMA COMPANY UNDERVALUED? (Guest Post)

The company was founded in 1998 and was listed on the Singapore Exchange’s Catalist board back in 2018. Hyphens’ share price performance was rather lackluster since its listing, hovering significantly below its IPO price of S$0.26 and hit a low of S$0.18 during the recent March COVID-19 pandemic driven sell-down.

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Hyphens Pharma revs up digital push amid Covid-19, Companies ...

This post was originally posted here. The writer, Royston Tan is a veteran community member and blogger on InvestingNote, with username known as Royston_Tan.

However, following a strong set of 1Q20 results, the company’s share price subsequently rebounded to hit an all-time high of S$0.39 in June 2020. Is there potentially more share price upside for the company? Let’s take a closer look.

Hyphens Pharma (Hyphens) is Singapore’s leading specialty pharmaceutical and consumer healthcare group. The company operates in three business segments:

Specialty Pharma Principals which is the largest contributor of both revenue and earnings to the Group. The company boasts more than 30 products in its portfolio and this figure is consistently increasing.

Proprietary Brands currently comprise of dermocosmetic products marketed under Ceradan® and TDF® brands as well as health supplement products marketed under their Ocean Health® brand. While this segment generates the lowest profitability among the three segments due to heavy investments in brand building, it has the highest revenue growth potential as well as earnings longevity.

Medical Hypermart and Digital is a B2B model where the company engages in the wholesale of pharmaceuticals and medical supplies in Singapore through Pan-Malayan. This segment is the second-largest revenue and earnings contributor to the Group but we note the potential lumpiness in revenue/earnings from one-off large tenders.

STEADY FINANCIAL PERFORMANCES OVER THE PAST 3 YEARS
INCOME STATEMENT

The company’s past 3-years financials painted a picture of earnings stability but not one that is truly exciting. While its reported net profit declined from S$6.1m in 2017 to S$5.4m in 2018, this was due to one-off IPO expenses amounting to c.S$0.9m. Its adjusted net profit was S$6.3m in 2018, representing a 3.6% YoY growth. In 2019, earnings grew by a similar 3.5%, a rate likely deemed too low by the market to justify a share price re-rating.

However, despite widespread business standstill in 1Q20 due to COVID-19, the company reported a strong set of 1Q20 financial results with Group revenue growing by 16.4% YoY, spearheaded by its proprietary brand segment. Coupled with slower growth in expenses, Hyphens’ 1Q20 operating margins improved by 1.6ppt and consequently grew its net profit by 48.6% YoY to hit S$2.1m.

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Hyphens Pharma International Ltd (SGX: 1J5) – Uncovering Healthcare Gems (Guest Post)

Hyphens Pharma International Ltd (SGX: 1J5) – Uncovering Healthcare Gems (Guest Post)

Hyphens Pharma International Ltd (SGX: 1J5) is a pharmaceutical company which focuses on the sales and marketing of specialty pharmaceutical products in key ASEAN countries through exclusive distributorship or licensing agreements with brand principals mainly from Europe and United States. $Hyphens Pharma(1J5.SI)

This post was originally posted here. The writer, Brian Halim is a veteran community member and blogger on InvestingNote, with username known as 3Fs and has 2151 followers.

The company was listed on 18th May 2018 about two years ago on the SGX Catalyst. Since then, they have grown over the years and have done reasonably well in the midst of the pandemic outbreak through the product offerings they provide.
I was invited to their recent results briefing which I attended and had a chance to speak and ask my questions directly with their CFO, Lee Wei and CEO, See Wah.
There were also other private investors that attended the call.

Core Businesses
Before we go into that and also run through their recent Q1 FY2020 results, let me give a brief context of their main core businesses.
The Group’s core business comprises of 3 main segments: Specialty Pharma PrincipalsProprietary Brands and Medical Hypermart & Digital.

The Group has exclusive distributorship to sell and distribute specialty products in countries that they have agreements on. The Group also owns well-known proprietary brands ofCeradan® andOcean Health® supplements that I personally consume at home myself.
Our family had also used the nasal spray product,Sterimar® for our children when they were younger.


Financial Results
The Group had a strong run of revenue and profits growth since FY2015 before they went IPO in FY2018.
5 Year CAGR for revenue and profit after tax increase 11.1% and 6.3% respectively.
The number would have been higher if not for the IPO expenses that they incurred in FY2018 that dragged the numbers down by a little bit.
Still, you can see from the past growth trend and after attending the call myself, I am able to appreciate the business model a lot better than before.

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