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KUALA LUMPUR: CIMB rated Hovid shares as 'add' to the portfolio with target price of 43 sen.

CIMB likes Hovid's strong long-term earnings growth prospects as the pharmaceutical markets in Malaysia and its key export destinations are set to grow at double-digit rates, driven by ageing populations and greater access to healthcare services and medicines.
"Hovid remains our top pick for exposure to the Malaysian healthcare sector. Potential re-rating catalysts are increased product registrations in its export markets and stronger 2H earnings.
"Despite meeting just 39 per cent  of our full-year forecast and 33 per cent of consensus numbers, Hovid's 1HFY6/14 core net profit was broadly in line with expectations as 2H should be stronger due to seasonally higher sales and the weaker ringgit which will boost exports. No dividend was declared as expected.
"We maintain our 'add' call, earnings forecasts and SOP-based target price. Increased product registrations in export markets and stronger 2H earnings could spark a re-rating," said CIMB in its report today.
CIMB expects Hovid to report stronger earnings in 2H due to seasonally stronger sales.
"On top of that, Hovid is a beneficiary of the weak ringgit because half of its revenue is derived from export sales, which are predominantly quoted in US$.
The ringgit has averaged 3.31 to the greenback YTD, 3 per cent weaker than the average in Jul-Dec 2013. The company is also actively pushing its export sales by registering its existing products with the health authorities in the export markets. It plans to roll out 10-15 products this year, which should expand its existing 400-strong product range by 3-4 per cent.
"Increased registrations of Hovid's drugs in its export markets will spur demand as more products are made available in these export markets. This will help to widen its profit margin and lead to higher profitability."