The stock has since pared its losses, inching its way up to 26 sen at 10.58am (an 18 sen or 42% drop from yesterday’s close).
It was one of the most active counters in early trade, with 64.2 million shares changing hands.
The massive sell-down shaved RM242 million from the group’s market capitalisation after it confirmed yesterday it had fallen under the PN17 classification for financially distressed companies.
This follows the company’s largest ever quarterly net loss of RM664.39 million in the fourth quarter ended Dec 31, 2022 (Q4 FY2022) from a net profit of RM85.47 million a year ago.
The net loss was driven by a RM552.3 million impairment on unsold Covid-19 vaccines, as well as a write down on the goodwill of its Indonesian manufacturing cash-generating units of RM50.3 million.
Pharmaniaga said in a Bursa filing yesterday that they had to provide the RM552.3 million sum for the vaccines due to the accounting treatment in accordance with the Malaysia Financial Reporting Standards (MFRS) requirements and the company’s own good governance practices.
“This provision inevitably triggered the criteria of Practice Note 17 for Pharmaniaga. The group is currently in talks with various parties, both local and overseas to purchase the vaccines,” it said, adding it is optimistic of favourable outcomes from the negotiations.
The evitable downgrades
In a note today, MIDF Research said it had revised downwards its earnings estimates for Pharmaniaga for FY2023 and FY2024 by 79% and 87%, respectively. It also slashed the target price to 48 sen from 77 sen previously.
‘’All in all, we downgrade our recommendation from ‘buy’ to ‘neutral’. Nevertheless, we maintain a positive view of the group on the basis of its large portfolio of pharmaceutical products in line with growing demand, halal market penetration, and long-term marketing plan for international sales,’’ it added.
Hong Leong Investment Bank downgraded the counter to a “sell”, cutting its FY2023 and FY2024 earnings forecasts by 51% as it raised the operating expense and finance cost assumption on Pharmaniaga.
However, it noted there could potentially be a reversal in the impairment provision should the group be able to sell more of its existing Covid-19 stockpile.
The group’s recovery will hinge on their regularisation plan, which they have assured will focus on strengthening its financial standing and the viability of core business activities.
“The group also guarantees that its operational activities for both concession business with the health ministry and non-concession business with the private sector will not be disrupted and continue to be intact,” it stressed.
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