KUALA LUMPUR: Kenanga Research has maintained a cautious outlook for Pharmaniaga Bhd as the company guided for no further provisions going forward.
Pharmaniaga has a negative shareholders' equity of RM264 million as at Sept 30 this year, impeding its ability to give out dividends.
Kenanga Research said the government is also seeking better value-for-money contracts and Pharmaniaga might have to offer new rates that are more competitive.
"We project pedestrian earnings growth in financial year 2024 (FY24) at a level similar to pre-Covid-19, averaging RM40 million-RM60 million driven by regular orders for medical supplies from the Ministry of Health concession
"It guided for no further provisions going forward. It still keeps some unsold vaccines (which have been fully provided for) and has managed to sell some," it said.
The company dipped into the red in the third quarter of FY23 as it posted a loss of RM49 million due to the write offs for slow-moving expiring inventories namely personal protective equipment and needles of RM65 million, and product development costs worth RM7.6 million due to the non-commercial viability of the products.
It added that Pharmaniaga is hopeful to exit PN17 status by end-2024.
"Recall, Pharmaniaga has proposed to regularise its financial situation via a proposed capital reduction and cancellation of RM180 million issued share capital, a four-for-five rights issue of 1.18 billion new Pharmaniaga shares with 1.18 billion free warrants and a proposed private placement of 714 million new Pharmaniaga shares or 26.9 per cent of the enlarged issued share capital after the proposed rights issue," noted Kenanga Research.
The firm maintained its "Underperform" call for the stock with a target price of 31 sen.