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Bioalpha's China contracts expected to drive significant improvement in coming quarters


KUALA LUMPUR (Nov 28): Integrated health supplement company Bioalpha Holdings Bhd’s contracts with China parties, namely Guizhou Yuhexin Trading Ltd and Hainan Shifengfu Co Ltd, are expected to drive a significant improvement in the upcoming quarters after ravages by Covid-19.

“We expect the gradual commencement of the new China contracts in the upcoming quarters to drive a significant improvement going forward,” CGS-CIMB Securities said today.

Recently this year, Bioalpha entered into two agreements with Guizhou Yuhexin and Hainan Shifengfu, valued at 700 million yuan (RM426.7 million) annually for a duration of five years.

The partnership commenced in September 2020 with Bioalpha supplying health and nutritional goods to Guizhou Yuhexin to be sold mainly in the Guizhou province of China.

“Our recent channel checks with Bioalpha indicated that effective gross profit margins for the contracts are 3%-5%,” CGS-CIMB said in a research note here today.

Bioalpha’s core net loss came in at RM7.1 million for the third quarter ended Sept 30, 2020 (3QFY20), against a net profit of RM2.5 million for 3QFY19, after adding back a one-off loss of RM4.2 million (write-offs of inventories and bad debts, and impairment of trade receivables and goodwill).

The disappointing 3QFY20 results were due to weaker-than-expected export sales and a surge in operating cost.

On a quarter-on-quarter (q-o-q) basis, 3QFY20 revenue rose by 7.5%, but core net loss widened by 8.9% mainly due to weaker-than-expected export sales and a surge in operating cost.

CGS-CIMB has lowered its target price (TP) for Bioalpha to 28 sen as it believes the recovery in earnings going forward has largely been priced in at current valuations.

http://www.theedgemarkets.com/article/bioalphas-china-contracts-expected-drive-significant-improvement-coming-quarters

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