Company Update: 04 April 2022
Novem Acquisition to boost top and bottom-line growth
• A good set of FY21 results. Hyphens’ net profit increased 11.1% YoY to S$6.8mn in FY21, compared to the 5.6% decline in FY20. Meanwhile revenue grew 4.1% in FY21 and gross profit margin rose 2.1 ppts to 38.2%.
• Novem acquisition financially lucrative. Hyphens acquired Novem, a Singapore-based leading healthcare-focused distributor of pharmaceutical products, nutraceutical products and medical services in early December 2021. The acquisition is expected to bring earnings accretion to Hyphens’ FY22 results and beyond.
• Singapore’s first HSA-registered e-pharmacy. In early January this year, the company’s WellAway e-pharmacy was officially launched. Subsequently, the establishment opened up deals for Hyphens, such as the recent
collaboration with SATA CommHealth to deliver a new primary healthcare system for migrant workers.
• We maintain Hyphens with an Outperform recommendation but revised our TP down to S$0.38 due to the overall de-rating of valuation multiples across the sector.
FY21 financials: YoY improvement
Revenue was up 4.1% YoY to S$125.9mn in FY21, while gross profit rose 10.2% YoY to S$48.1mn. This was mainly due to the improvement of gross
profit margin to 38.2% in FY21, compared to 36.1% in the previous period. Net profit after tax rose 11.1% YoY to S$6.8mn, translating to a net profit margin of 5.4%, 0.3ppts higher compared to FY20. Basic and diluted EPS increased from 2.05 Sing Cents in FY20 to 2.27 Sing Cents in FY21.
Value add from Novem acquisition
Novem is a Singaporebased leading healthcare-focused distributor of
pharmaceutical products, nutraceutical products and medical services. The company has more than 40 brand principals mainly across Europe and Asia and serves more than 1000 active customers including hospitals, polyclinics, specialists and general practitioners. It has more than 150 products in its portfolio, including proprietary brands of generics and inhouse developmed nutraceutical products. The acquisition of Novem is expected to contribute positively to Hyphens’ business, and already added close to S$1mn revenue within a month of operations in December 2021. The acquisition will also further strengthen Hyphens’ proprietary brands business segment with the addition of Novem’s proprietary brand of
products and strengthen the company’s market leadership position in Singapore.
Leveraging on e-pharmacy license for expansion
In early January this year, Hyphens announced its official launch of
WellAway e-pharmacy, a digital platform where patients can receive e-prescriptions from a qualified medical doctor and have the medicine delivered directly to them. Pharmaceutical group, Servier Singapore, is working closely with WellAway to explore possibilities of healthcare
digitalisation. With this golden ticket of being Singapore’s first HSA-registered e-pharmacy, more collaboration and deals are expected to occur moving forward.
Docmed, a subsidiary of Hyphens, recently announced in early March that it has signed a partnership agreement with SATA CommHealth to deliver a new primary healthcare system for migrant workers starting 1 April 2022. Under the partnership, WellAway e-pharmacy will provide e-pharmacy
medication delivery to the migrant worker patient after teleconsultation by SATA CommHealth. Docmed’s colloboaration with WellAway eliminates the need to manage a large inventory of medications and e-prescriptions are conveniently delivered to the masses.
Valuation & Action
We maintain Hyphens with an Outperform recommendation but revised our TP down to S$0.38 due to the overall de-rating of valuation multiples
across the sector. Our TP is based on 15.0x P/E to FY22F EPS of S$0.025.
Covid-19 operational risk, Forex risk, Margin pressure due to competition.