Pharmaniaga Bhd’s stock jumped as high as 7.52pc or 17sen to RM2.43sen, the highest ever recorded this year with almost 1.42 million shares changed hands yesterday (11 Nov).

The stronger buying interest among investors was due to the government’s decision on Nov 8 to allow the company to continue procuring drugs and medical supplies for the next 25 months until a new concessionaire is appointed through open tender.

The strongest surge in 12 months is led by temporary contract extension optimism, which Kenanga Research views as a “short-term reprieve” for the integrated pharmaceutical group.

On Oct 31 the government announced to end Pharmaniaga’s exclusive and long-running drugs and medical supplies concession for the Health Ministry.

This has dealt a blow to the company with its share price tumbled 11.6% on the same day, with about RM110mil in Pharmaniaga’s market value being wiped out in just two days following the announcement.

Equity analysts have also downgraded the stock, which is 56.1%-owned by government-linked Boustead Holdings Bhd.

However, at yesterday’s share price of RM2.43, Pharmaniaga has recouped nearly 84% of its lost market value since Oct 31 and had a market capitalisation of RM635mil as of Nov 11.

In a note issued yesterday, Kenanga Research said it was “positively surprised” by the 25-month interim concession period until end-2021.

“Due to the fluidity of the news and this latest development, we have upgraded our FY20 net profit by 40%, taking into account a 20% increase in revenue.

Kenanga Research also pointed out that Pharmaniaga’s low-margin contract for logistics and the distribution of medicines was renewed by the government for an additional five years.

The contract will be effective from Dec 1 and be based on Pharmaniaga’s capabilities and performance.

 “We believe the contract extension for logistical support lies in Pharmaniaga’s capability in the development of a procurement and logistical computerised system, namely, the Pharmacy Information System (PHIS).

“PHIS play a vital and integral role in ensuring the distribution of drugs to patients and effective management of stock levels,” it said.

Sources link: https://www.linkedin.com/pulse/pharmaniaga-stock-record-years-strongest-jump-azlan-abu-bakar/