• 1H22 revenue and PATMI were 54%/67% of our FY22e forecast. Earnings were above expectations due to a then higher-than-expected earnings contribution from newly acquired Novem Ltd and associates.
• Underlying organic growth was an 11% YoY rise in PATMI to S$4.8mn. Growth was broad-based across specialty pharma and proprietary brands.
• We maintain our FY22e earnings. We expect some upfront staff and technology costs in 2H22 with the establishment of DocMed to develop a healthcare platform for doctors, drug companies and other medical vendors.  Our BUY recommendation and DCF target price of S$0.43 is maintained. With Novem, Hyphens can profitably develop the public sector channel for its specialty products to complement its strength in private sector clinics.

The Positive

+ Revenue growth across key segments. Specialty pharma revenue surged 45% YoY in 1H22 to S$48mn. Excluding Novem, organic growth was 18% YoY to S$39mn. The return of more elective surgeries and other visits postponed during the pandemic were some drivers of demand. Proprietary brands growth of 16% YoY was led by key brands in dermatological (Ceradan and TDF) and health supplements (Ocean Health).

The Negative

– Loss of Biosensor. Hyphens announced it has amicably ceased the distribution of Biosensor by the end of 2022. Biosensor contributed 6% of revenue in 1H22 catering to the Vietnam market. All related costs and inventories will be wound down as the distribution agreement ends.

Outlook

Hyphens continue to take steps in expanding its proprietary brands in the region. New Ocean Heath products (Omega 3, Vitamin D3) are to be launched in Malaysia and Vietnam. An exclusive license and supply agreement with Lederlon for the treatment of osteoarthritis has been inked.