August 31, 2020 -- InvestorsHub NewsWire -- via Borneo Post --
Corporate Malaysia has certainly seen an upset in the form of the
Covid-19 pandemic, leading some firms to reevaluate their business
plans going forward.
Some have made decisions to go after businesses now considered
lucrative in today’s times.
For example, many have gone into production of personal protective
equipment (PPE) when supply was once deemed insufficient for
healthcare workers, let alone for the general public.
PPEs remain vital in preventing transmission of infections
through activities such as cleaning, waste management and
healthcare related to the outbreak.
Companies have since ramped up the production of PPEs such as
face masks and rubber gloves as demand continues to rise for these
two hot items.
Players such as Notion VTec Bhd, SCGM Bhd, Karex Bhd, Caely
Holdings Bhd and even national automotive manufacturer DRB-Hicom
Bhd jumped on the PPE production bandwagon.
Meanwhile, others like MyEG Services Bhd, Ho Wah Genting Bhd and
LYC Healthcare Bhd tapped into distribution of Covid-19-related
products such as test kits or sanitation.
Pandemic longer than expected
Meanwhile, the Covid-19 pandemic has now entered into the third
quarter of 2020 (3Q20), which analysts observe has turned out to be
more lasting than expected.
“In our last strategy note, we stated our projection that the
crisis would subside sometime in May or June from which the market
would recover sustainably,” the research arm of Kenanga Investment
Bank Bhd (Kenanga Research) said in its 3QCY20 investment strategy
report in July.
“Our base case projection now is that Covid-19 risks in global
markets will only subside substantially in early 2021 and in the
near term, we expect markets to be unnerved every now and then with
concerns over spikes in new second wave infections.”
“The rise in new infections in the US in late June has been
quite alarming with recent readings showing north of 45,000 versus
peaks of 39,000 in the first wave.
“If such high readings continue to rise, we would not be
surprised if the lockdown easing reverses in the badly affected
states, which would put a dent to confidence in this nascent phase
of market recovery.
“Fortunately, the outlook on Covid-19 containment locally is
much better as the number of new cases has continued to decline
without significant evidence of a lasting second wave yet.
The race for Covid-19 vaccines
Today, firms are vying for vaccines as the once-all solution
Globally, countries are hot on each other’s heels in the race to
produce the first batch of its coronavirus vaccine. Russia is
currently leading the pack after President Vladimir Putin announced
on August 16 it is first in the world to approve a vaccine.
“The first batch of the novel coronavirus vaccine developed by
the Gamaleya research institute has been produced,” the health
ministry said in a statement quoted by Russian news agencies,
according to AFP.
Putin said the vaccine was safe and that one of his own
daughters had been inoculated, although clinical trials were not
yet complete and final stage testing involving more than 2,000
people only started recently.
Putin’s announcement about the vaccine was met with caution from
scientists and the World Health Organisation who said it still
needs a rigorous safety review.
In the US, Moderna and Pfizer, the companies leading the US race
for a coronavirus vaccine, disclosed this week they have enrolled
more than half the people needed for the 30,000-person trials that
represent the final phase of testing.
Malaysia ramps up efforts
Not one to be left out is Malaysia. Malaysia will adopt the
World Health Organisation’s (WHO) recommendations for the country’s
eventual Covid-19 vaccine rollout.
According to Health Minister Datuk Seri Dr Adham Baba in reponse
to a Malay Mail query, “The vaccine will be given according to
recommendations made by WHO.”
However, Dr Adham said that the government has not yet decided
if it would make vaccinations – for Covid-19 or other diseases –
“On mandatory vaccination, a special committee will be
conducting a review session with stakeholders,” he said, adding
that the government was now using an educational approach to
Last week Science, Technology and Innovation minister Khairy
Jamaluddin said that he would recommend to the Cabinet that
Covid-19 vaccine be provided for free to all Malaysians.
“The Cabinet has not decided yet, but my recommendation is that
once we have purchased the Covid-19 vaccine, they should be given
to all Malaysians free of charge,” he told reporters during a press
conference after the launch of the National Technology and
Innovation Sandbox (NTIS).
Apart from China, Khairy reportedly said that Malaysia was also
looking at other vaccine manufacturers that could produce a safe
and effective vaccine fast and at a reasonable cost.
Khairy said that his ministry had been assigned by Prime
Minister Tan Sri Muhyiddin Yassin to negotiate directly with the
vaccine manufacturers so that Malaysia could purchase them at the
best possible price.
Pharmaniaga, Duopharma frontrunners to win tenders for
In line with the anticipated vaccines – projected to be
available as early as 1Q21 – local pharmaceutical players are ready
to play their part in getting these out to the market.
Last month, Science, Technology and Innovation Minister Khairy
Jamaluddin said the government had agreed that the facilities owned
by Duopharma Biotech Bhd (Duopharma) and Pharmaniaga Bhd
(Pharmaniaga) be used for bottling the vaccine.
According to Bernama, Khairy had reportedly explained that the
two companies were chosen as both are government-linked – Duopharma
is owned by Permodalan Nasional Bhd and Pharmaniaga is owned by
Boustead Holdings Bhd – and currently have unused capacity that can
be directed towards this purpose.
Pharmaniaga in particular, has been in the headlines with the
group’s acting managing director Mohamed Iqbal Abdul Rahman saying
that the company is pumping in RM2 million to repurpose its
existing small volume injectable (SVI) plant in Puchong for
Covid-19 vaccine fill and finishing process.
To note, Pharmaniaga has seven plants at six sites in Malaysia
and one plant in Bandung, Indonesia, out of which only one,
Pharmaniaga LifeScience Sdn Bhd in Puchong, has the necessary
equipment for Covid-19 fill and finish process.
Mohamed Iqbal added that the facility is good manufacturing
practise (GMP) approved plant and the only SVI plant in Malaysia
with European Union GMP.
“Our capacity is around 10 million doses per month on 10 doses
vial,” he said.
For the outlook for this year, Mohamed Iqbal expects the
company’s business to normalise in 4Q20 – such as receiving the
government’s orders at pre-Covid-19 level, and private sector to
continue to grow.
“We will ensure the continuity of the government’s concession,
focus on niche manufacturing such as to invest in new therapeutics,
and expand our digitalisation exercise.”
Overall, he foresees continuous growth for the pharmaceutical
industry albeit in a more competitive environment, as the
government had increased about six per cent of expenses in the
healthcare sector under the previous budget.
Frontrunner for tender
Following Pharmaniaga’s briefing, the research arm of MIDF
Amanah Investment Bank Bhd (MIDF Research) gathered that
Pharmaniaga is one of the frontrunners to win the tender.
This is due to the fact that Pharmaniaga has a well-established
logistics and distribution network nationwide and large capacity of
sterile and liquid plant to conduct the fill and finish process for
“While there is no information on the financial impact on
Pharmaniaga if it were to land the tender, the volume is expected
to be quite substantial,” the research arm said in its review.
“We were made to understand that at a bare minimum, the vaccine
needs to prepared for 20 per cent of the Malaysian population that
belongs to the vulnerable group – those aged above 60 years old and
frontliners which makes up about seven million of the
“This translates to about 21 million doses required to be
prepared as the vaccine will require dual or triple doses to
complete an immunisation program.”
“Additionally, management also disclosed during the briefing
that it intends to embark on producing vaccines in the coming
years. The company envisages producing all the 12 vaccines that are
currently listed under the National Immunisation Program in the
future and currently in the midst of constructing the plant will be
dedicated to the vaccine program.
“It is estimated to cost Pharmaniaga a capital expenditure
(capex) of RM100 million within the next two years.”
Overall, MIDF Research has a ‘positive bias’ on Pharmaniaga
given that the company remains as the few beneficiary in the
current global Covid-19 pandemic crisis.
“In this regard, Pharmaniaga is well-positioned to benefit from
this as it among the few industry players that have the capability
to manufacture as well as; distribute medical drugs and
pharmaceutical products nationwide owing to its extensive network
Earnings review show strengths
In MIDF Research’s view, Pharmaniaga’s 2QFY20 and 1HFY20
earnings, which came in at RM9.9 million and RM32.4 million
respectively, were commendable despite it being its seasonally
“We understand that 2QFY20 was challenging due to the
enforcement of the movement control order (MCO) which has not only
restricted sales but also increases the logistics costs during the
period by +RM3.0m during the quarter.
“That said, its logistics and distribution (L&D) segment was
operating at full capacity as it was deemed as an essential service
whilst its manufacturing segment was operating at 50 per cent
capacity during the MCO.”
As for Duopharma, after accounting for taxation, the group’s net
profit for 2Q20 rose to RM14.73 million, up from RM13.92 million in
In a statement on the group’s latest financial results, group
managing director Leonard Ariff Abdul Shatar confirmed that
Duopharma had been informed that the contract period for the supply
of pharmaceutical and/or non-pharmaceutical products to hospitals,
clinics and others under the Malaysian Government have been
extended for 25 months, commencing December 1, 2019 until December
Also, the contract period of the Offtake Agreement Programme for
the supply of human insulin formulations has been extended for one
year, commencing December 2, 2019 until December 1, 2020.
“These extensions will help to stabilise a significant portion
of the group’s revenue for the said period,” he said.
“This will also enable the group to mobilise our resources to
intensify our foray into specialty products as one of our
strategies moving forward to create a pool of niche products.
“Additional allocations have also been made to the Ministry of
Health as a part of its national Covid-19 countermeasures, which
further fuels an optimistic outlook since approximately 50 per cent
of our sales are to the public sector.”
Ho Wah Genting researches Covid-19 patent
On August 6, Ho Wah Genting Bhd (HWGB) through its wholly-owned
subsidiary HWGB Biotech Sdn Bhd (HWGB Biotech) unveiled that it has
signed a memorandum of agreement (MoA) with US-based E-MO Biology
Inc (EBI) to undertake research on Covid-19 patent
In a statement, HWGB said EBI had on June 15 submitted the
Initial Investigational New Drug (IND) application to the US Food
and Drug Administration (FDA) to conduct phase IV clinical trials
for a new indication which proposed the use of existing
poliomyelitis virus vaccines (polio vaccines) for prevention of
Covid-19 which is currently pending approval.
Its chief executive officer Lim Ooi Hong said the proposed
collaboration is expected to contribute positively to the earnings
of HWGB upon commercialisation of the vaccines.
“The proposed collaboration will see HWGB investing RM4.18
million into EBI, entitling the company to 40 per cent of the total
profits from the commercialised vaccine.
“HWGB will also have exclusive rights for the production,
distribution and sale of the repurposed vaccine based on the polio
vaccine for use in preventing Covid-19 infections in Southeast
Asian countries,” he said.
In addition, HWGB will have the right to retain all profits from
the vaccines, as well as a royalty-free license together with the
granting of sub-licenses for the use of the trademark and other
intellectual property rights in relation to the vaccines in
Southeast Asian countries.
EBI sole director and shareholder Prof Qiyi Xie said by having
HWGB Biotech on board, the company would be able to penetrate
Southeast Asian countries as soon as the vaccines are made
available to the market.
On Friday August 28, HWGB revealed the United States Food and
Drug Administration (FDA) has responded to the second communication
to its joint venture by requesting EBI to provide further
information on the Investigational New Drug application which
proposes the use of existing poliomyelitis virus vaccines for
prevention of Covid-19.
US’ Generex signs agreement with Malaysia’s Bintai
Generex Biotechnology Corporation on August 18 announced that
the company has signed a memorandum of understanding with Bintai
Kinden Corporation of Malaysia for the development and
commercialization of the Covid-19 vaccine.
The vaccine is designed as a “Complete Vaccine” that has the
potential to induce the T-Cell and antibody immune responses that
can provide protective immunity with long-lasting immunologic
memory against Covid-19 in a highly specific manner to ensure
With this agreement, Bintai has agreed to pay Generex up-front
development fees and back-end licensing payments, and will pay 100
per cent of the funding required for the commercial development of
the vaccine including laboratory work, manufacturing, regulatory
filings and the clinical development program for regulatory
approval of the vaccine in Malaysia.
Additionally, upon approval of the Ii-Key-CoV-2 vaccine in
Malaysia, Generex will earn royalties on sales of the vaccine with
potential revenues of up to US$150 million.
Bintai and Generex agree that the vaccine manufacturing should
serve not only as an essential element of a vaccination program for
each country, but also as an economic stimulus, as many countries
shift their focus to rebuild their economies following the
inevitable economic shutdown as the battle of the global pandemic
Generex chief executive officer Joseph Moscato in a statement
said, “We are excited and proud to have Bintai as a partner to
develop our Ii-Key-SARS-CoV-2 vaccine against Covid-19. Our
‘complete vaccine’ has the potential to generate both a cellular
(T-Cell) and humoral (antibody) response to ensure immune system
memory and long-term immunity from Covid-19.
“Our partners in Malaysia have recognised the true potential of
the Ii-Key technology to activate the T-Cell response as part of
any successful coronavirus vaccine that enables long-term
“Further, our proprietary vaccine development process is
designed using computational vaccinology and immune system
screening program to identify specific target regions of the
SARS-CoV-2 spike protein that can neutralise the virus without
generating the off-target effects that lead to the terrible
complications of Covid-19.
“This deal also leverages Bintai’s expertise in industrial
engineering and construction to provide the manufacturing
capability that can produce the billions of doses of vaccine that
will be necessary to immunise a global population.”
Gloves to keep growing despite strides in
The vaccines sentiment, whilst being good news, may not be good
As news of vaccine clinical trials emerged in the past few
weeks, Malaysia’s glove sector initially took a hit and analysts
even projected that average selling prices (ASPs) of gloves will be
affected by the latest developments.
This was apparent when rubber glovemakers experienced its worst
declines this month.
When queried by investors on the turning point in glove demand
or ASP trend due to the vaccine news, Macquarie Equities Research
(MQ Research) believed demand should remain buoyant in the near
This is due to limited vaccine manufacturing capacity and
various concerns on clinical trials.
“In addition, the first-ever published list of medical supply
shortages by US FDA has reiterated MQ Research’s investment thesis
that market continues experiencing severe glove shortages.
“Hence, it believes recent pullback in share prices is an
opportunity to accumulate,” the research firm said.
In MQ Research’s view, the market had priced in the recent
vaccine news – the approval of Russian vaccine Sputnik V, which
comes after less than two months of human trials, and promising
trial results of a Chinese vaccine. This had led to the market
questioning glove demand and overall ASP trends going forward.
“Undoubtedly, news on vaccines will continue giving volatility
on glove share prices. MQ Research, however, reiterate its view
that glove demand to remain strong into the first half of 2021
This was considering that the World Health Organisation (WHO)
and several countries such as the US and Germany are striking a
cautious note on Covid-19 vaccines; Russia vaccine manufacturer,
Sistema currently only has capacity of 1.5 million doses of vaccine
per year, which is not sufficient to supply worldwide; resurgence
of Covid-19 in Hong Kong, Japan and South Korea, suggesting
countries’ healthcare systems will continue to increase their
personal protective equipment (PPE) stockpile; and the flu season
will hit the US in October, which could bring a ‘double barrel’
outbreak there, and flu activity usually peaks between December and
Echoing this sentiment is Chua Zhu Lian, partner in charge of
group strategy at Vision Group, who told BizHive that for the glove
business, what matters to the fundamentals of their business is the
impact of a vaccine distribution on the demand of gloves.
“After speaking to multiple glove owners, my conclusion is that
the demand for gloves is here to stay due to significantly
heightened hygiene awareness as a global phenomenon even in less
developed countries,” he said.
“I foresee that there should be quite a low probability of the
world downgrading their hygiene standards back to pre-Covid level
even after the pandemic. Nevertheless, while glove consumption is
still expected to remain at a higher level after a vaccine is
found, growth rate should normalise back to historical trends in
the longer run, tracing back to the increase in standards of
“In short, we now live in a world with much higher standards of
hygiene, thanks to the unified battle against Covid-19.”
Chua said the next key consideration would be the impact of
supply and demand as well as how the average selling prices of
gloves determine the top and bottom line of glove companies.
“My take is that glove prices are unlikely to rise perpetually
given that supply will naturally catch up with demand when there
are “abnormal” profits to be made. This is just how the market
works,” he enthused.
“I think glove makers will continue to enjoy a good harvest
until supply picks up, especially from China. In my opinion, in
order for glove makers to sustain their profits, it has to come
with an increase in production volume as average selling prices
normalise in the longer run.”
The final consideration, he said, is whether a vaccine would
affect market valuations of the glove companies against their
bottomline and whether investors can time the market to make
“I am not an advocate of market timing – I simply believe it is
impossible to accurately time the market, so my best guess is as
good as yours – on whether there will be news on a vaccine this
evening, tomorrow or next month,” Chua put forward.
“In the short run, market is sure to correct itself and as it is
the news on vaccine has already contributed to the volatility on
glove counters though I doubt there can be consistency in returns
through timing the gloves counters.
“In a nutshell, I think the impact of a vaccine on the earnings
of glove companies would be quite limited in the short run but the
impact on its’ share price remains everyone’s wild guess.
“In the short run, market behaves like a voting machine, if you
think you can predict the aggregate votes of the market on the
glove counter, including the moves from the more sophisticated
institutional investors, you may participate in the volatility.
“Otherwise, it is better to remain conservative and stick to
investing based on the fundamentals of a company, back to the
No slowing down for glovemakers
AmInvestment Bank Bhd (AmInvestment Bank) gathered that big
glove producers such as Top Glove Corporation Bhd (Top Glove),
Kossan Rubber Industries Bhd (Kossan), Hartalega Holdings Bhd
(Hartalega), Supermax Corporation Bhd (Supermax) and Sri Trang,
have plans to increase capacity by 21 per cent in 2020E, 23 per
cent in 2021F and 27 per cent in 2022F.
“We believe that higher supply of gloves from the expanded
capacity will more than offset the increase in demand,” the
research firm said.
“Moreover, we think that recent strides in vaccines formation
will affect the ASP of gloves as the urgency of glove orders would
“We are not making any changes to our earnings forecasts as we
have already assumed that a Covid-19 vaccine would be available by
According to AmInvestment Bank, the glove companies’ capacity
expansion plans will add 126 billion pieces (54 per cent) of
capacity in two years by end-2022.
“Although this bodes well in terms of ability to cater to higher
volume of orders for the next one to 1.5 years, we think that a
short-term supply glut will come back into play in 2022F.
“On a positive note, we expect sales volume to continue growing
in 2021F as we anticipate a structural change in the way gloves are
“There will be a new normal where glove usage per capita will
increase as hygiene measures become stricter.”
AmInvestment Bank explained that this is expected to apply not
only in the healthcare sector but also across different industries
like food and beverage (F&B).
The research firm noted that the glove consumption per capita in
emerging markets such as India and China is low at around two to
six gloves as opposed to circa 100 to 280 gloves for developed
Looking ahead, AmInvestment Bank believed that at current share
price levels, the valuations for glove companies under coverage
(Top Glove, Kossan and Hartalega) have fully priced in the
companies’ earnings outlook.
“We think that the ASP will begin to taper off in the first
quarter of 2021 (1Q21) after the expected increase in ASP until
end-2020, which have been priced in.
“Share prices of all of the glove companies in our coverage have
exceeded their target prices.”
Top Glove released its 3Q ended May 31, 2020 (3QFY20) results,
which saw the group delivering its most stellar results to date,
according to its statement on June 11.
To recap, profit after tax (PAT) was equally impressive at RM350
million, increasing by 365 per cent year-on-year and 202 per cent
quarter-on-quarter, which at the nine-month mark already makes up
95 per cent of FY19’s full year achievement.
On the group’s sales volume, Top Glove noted that it grew by
about 25 per cent versus the corresponding period in the previous
financial year, as well as the preceding quarter.
“The group’s extraordinary performance was attributed to
unparalleled growth in sales volume, on the back of the global
Covid-19 pandemic,” the group said in its statement.
“Monthly sales orders went up by some 180 per cent, resulting in
long lead times, which went up from 40 days to around 400 days,
whereby orders placed now would only be delivered over a year
“However, Top Glove has endeavoured to allocate capacity to as
many countries as possible, to ensure its life-saving gloves reach
those most in need, while also prioritising its existing
“It also accommodated requests from various governments of
hard-hit countries who approached the group directly to procure
“Following the marked increase in glove demand from virtually
every country in the world, the group’s utilisation rate rose from
a pre-Covid level of 85 per cent to above 95 per cent in 3QFY20,
resulting in greater efficiency and economies of scale.
“Additional capacity which came onstream in 3QFY20 also enabled
the group to meet demand growth, while upward revisions in ASPs in
line with prevailing market prices were also effected.”
Hartalega also recorded exceptional results recently, with net
profit for 1QFY21 coming in at RM221.06 million, up from RM94.25
million in the year-earlier period.
Meanwhile, Supermax’s 4Q20 PAT soared by 2,815.4 per cent year
on year to RM408.3 million.
With this strong performance, the group achieved industry
leading earnings before interest, tax, depreciation and
amortisation (EBITDA), profit before tax (PBT) and PAT margins of
60.4 per cent, 55.9 per cent and 43.9 per cent, respectively in
“The demand for gloves as a personal protective equipment has
heightened as the world fights the Covid-19 pandemic,” Supermax
“We are seeing the emergence of new consumers and new
consumption not previously seen before prior to Covid-19.
“Currently, the group is in an oversold position. The surge in
demand has resulted in a rapid rise of ASPs since March 2020.
“Governments all over the world have increased healthcare
spending budgets to contain the effects of the pandemic and in
preparation of a possible second or more waves.
“At this point in time, the world continues to discover of new
strain of viruses and in light of these developments, the group
expects demand to remain buoyant in 2021 and beyond.”
Similarly, Kossan joined its fellow glove industry players in
reporting PAT of RM132.35 million for 2QFY20, up 133.39 per cent
from the preceding year corresponding quarter.
“New cases continue to be high with concerns of a second wave
occurring as countries around the world reopen their economies. As
a result, the demand for protective gloves grew exponentially,
leading to a supply-demand imbalance,” Kossan said on its
“With our selling prices for gloves quoted 45 to 60 days before
delivery, the increase in prices started to be reflected in June
2020 and we will definitely see a significant quarter-on-quarter
increase in average selling prices in 3Q and especially in
“Premised on the above and with additional capacity of around 15
per cent to 20 per cent, management is confident of a further
step-up in revenue and profit growth on a quarter-on-quarter basis
in 3Q and more significantly in the 4QFY20.”
SOURCE: Borneo Post
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