Brokers' Take

Asiapharm Group, March 2 close: 60.5 cents

03 March 2005
The Business Times

UOB Kay-Hian Research, March 1

OUR recent trip to Asiapharm's headquarters and manufacturing facility in Yantai, Shandong, China reaffirms our positive view on the company and its strong growth prospects. Its penetration into the large hospital network via the National Health Insurance (NHI) scheme is gaining momentum. Orderbook indications from the hospital drug supply tenders are robust. Growing acceptance of natural drug formulations will drive industry growth at over 20 per cent a year.

We project earnings per share growth of 52.4 per cent and 43 per cent for FY05 and FY06 with attractive price earnings at 11.5 and 8.0 times respectively. The recent weakness in the stock has no fundamental basis and it presents an excellent opportunity to accumulate the stock. Maintain BUY.

The company's growth strategy remains intact with a multi-pronged approach:

• Increased penetration into the large hospital network;
• Increased number of drugs approved under the NHI scheme;
• New applications for its existing products; and
• Penetrating new markets outside China.

Its flagship Maitongna product, which has achieved mature status, will provide a stable base, while its newly approved NHI-status drugs Nuosen and Elcatonin are expected to boost revenue and profits. Another top-selling product, Lutingnuo, was listed as a National Leading New Product in China, with sales growth of 433 per cent to 63.6 million yuan in FY04.

We project EPS growth of 52.4 per cent and 43 per cent for FY05 and FY06 to a net profit of 109.5 million yuan and 156.5 million yuan respectively. Its FY05 PE at 11.5 times remains attractive and we maintain our target FY05 PE of 15 times or a target price of S$0.80.
BUY

Compiled by JOYCE KOH