Vaccine distribution hype deflates

Putrajaya’s pledge to provide free vaccines for locals and foreigners has deflated investor expectations of market opportunity


SHARES of companies seeking a role in the country’s vaccine rollout for Covid-19 continue to remain under pressure as investors revise expectations and value of the thematic.

Much like rubber glovemakers that gained from the pandemic, companies like Pharmaniaga Bhd, Duopharma Biotech Bhd and Bioalpha Holdings Bhd — which saw their share price rise sharply earlier this year amid market talks of their involvement in the packaging or distribution of Covid-19 vaccines — have steadily lost ground.

Pharmaniaga’s share price last closed at RM3.26, 34.3% lower from RM4.96 at the start of the year, wiping off RM445 million of its market valuation. It rallied to as high of RM5.28 two days after it announced a partnership with China’s Sinovac Life Sciences Co Ltd on Jan 12 for the supply of 14 million doses of Covid-19 vaccine in Malaysia.

Duopharma Biotech’s share price also erased earlier gains, closing 10% lower year-to-date (YTD) at RM2.86 yesterday compared to RM3.18 on Jan 4. Its share price climbed to as high as RM3.70 after it signed an agreement with the government on Jan 26 to supply 6.4 million doses of the Russian-developed “Sputnik V” Covid-19 vaccine. Integrated health supplement company Bioalpha’s shares have also fallen 21% YTD to settle at 22 sen yesterday from 28 sen at the start of the year.

The company on Jan 25 announced it had entered into a two-year procurement and distribution agreement with Shanghai Bukun Trading Co Ltd for the procurement and distribution of vaccines in Malaysia, including the Covid-19 vaccine developed by Sinovac Biotech Ltd.

Putrajaya’s pledge to provide free vaccines for both Malaysians and foreigners living in Malaysia has deflated investor expectations of the market opportunity for listed companies that announced plans to bring in and distribute vaccines for the virus.

The government has so far secured access to 66.7 million doses of Covid-19 shots which is enough to cover 110% of the population, leaving limited room for any surplus.

Prospects of allowing private healthcare to procure vaccines also remain unclear.

Shares of logistics provider Tasco Bhd, however, continue to see some upside after it entered into a memorandum of understanding (MoU) with MAB Kargo Sdn Bhd (MASkargo) to collaborate on providing transportation and distribution services for Covid-19 vaccines in Malaysia.

In a filing to Bursa Malaysia last week, Tasco stated that the MoU is for a period of 12 months and both parties seek to provide end-to-end vaccine delivery solutions, from the point of manufacture to the point of use, in both West and East Malaysia.

RHB Investment Bank Bhd has maintained a ‘Buy’ call on Tasco, with a higher target price of RM1.45.

The investment bank views the tie-up positively, as the pooling of the national carrier’s air freight resources with Tasco’s integrated logistics network would offer an end-to-end solution to logistics fulfilment, for the rollout of the National Covid-19 Immunisation Programme.

“This is in view of MASkargo’s experience in handling the initial shipments of Pfizer Inc-BioNTech SE and Sinovac vaccines, combined with Tasco’s sizeable fleet of temperature-controlled trucks and cold room warehouses, as well as its geographical reach,” it said in a report recently.

It said given the urgency of the vaccination programme, which is set to commence Phase 2 on a much larger scale, the tie-up presents an ideal consideration to mitigate the rollout’s inherent execution risks.

“We still like Tasco for its strong earnings trajectory, scarcity of listed peers with similar operational and growth profiles, and undemanding valuation relative to global third-party logistics players,” it noted.

However, RHB Investment said key downside risks to the tie-up include weaker than expected recovery in freight volumes and higher than expected operating expenses.

Tasco’s share price last closed at RM1.08, valuing the company at RM864 million.