The completion of Pharmaniaga Bhd’s regularisation plan and impending exit from its Practice Note 17 (PN17) status has generated positive vibes for the pharmaceutical group.
This has prompted MBSB Research to upgrade its call on the stock to a “buy” with a target price of 32 sen, a 23% upside from yesterday’s closing price of 26 sen.
The research house said the completion of its regularisation plan (RP) positions Pharmaniaga for a PN17 exit by the first quarter of next year (Q1 CY2026).
The RP involved a renounceable rights issue, private placement, and capital reduction that was completed early last month.
“We revised Pharmaniaga’s valuation to include this update, as well as its long-term plans for its logistics and distribution, and manufacturing operations moving forward,” MBSB said in a note today.
The capital reduction involved slashing the group’s share capital by RM520 million to wipe out accumulated losses, which stood at RM441.8 million as at end-March. This trimmed its issued share capital to RM249.6 million.
Prior to that, it had completed a 3.46 billion shares rights issue and a RM223.7 million private placement.
The exercise saw 19 new investors come on board, enlarging the share base to 6.557 billion, from 1.441 billion previously.
The placement saw Jakel Capital Sdn Bhd emerging as its second-largest shareholder with a 10% stake.
The Armed Forces Fund Board (LTAT) and its subsidiary Boustead Holdings Bhd remain the major shareholders with a combined stake of 43.9% as of end-July.
The healthcare concessionaire found itself tumbling into PN17 status in February 2023 after booking a massive impairment caused by its failure to offload RM552 million worth of Covid-19 vaccines.
Attractive upside
MBSB expects Pharmaniaga to show improved performance on the basis of uninterrupted operations and expansion, strong cash flow post-regularisation plan, and continuous government support from regulations and concessions.
“We believe that ongoing concession with the MoH (ministry of health), as well as continuous expansion in the group’s logistics and distribution, and manufacturing segments, will continue to contribute to Pharmaniaga’s growth potential.
MBSB said Pharmaniaga’s generic drug portfolio offers an attractive upside, being cheaper and readily available, while its biopharmaceutical products are expected to contribute significantly from the second half of FY2026 onwards.
It said Pharmaniaga is expected to add over 91 new biopharmaceutical products in the next five years. This includes human insulin, which has already secured procurement from teaching hospitals, and is awaiting the MoH tender.
MBSB noted the product could potentially contribute up to 400 million doses to the public market over three years if the tender is secured.
Pharmaniaga shares were up 3.8% or 1 sen at 27 sen at the time of writing, giving it a market capitalisation of RM1.74 billion.
