Pharmaniaga's PN17 status : a case of biting more than it can chew

GOVERNMENT-linked companies or GLCs are usually seen as sturdy, stout and financially solid.

GLCs such as Sime Darby, Tenaga Nasional and TM are the bedrock of the government's coffers and are integral components of Malaysia's corporate scene.

It is rare to see GLCs in Malaysia to collapse financially.

Thus, it was a shock yesterday when Pharmaniaga Berhad made a staggering RM600 million losses for financial year 2022.

The healthcare services company became a Practice Note 17 company virtually overnight and its shares dived more than 50 percent to RM0.25 sen.

What is the story morning glory? Was it a case of being too ambitious too fast?

Riding on the COVID-19 bandwagon

Just like any other pharmaceutical company, Pharmaniaga wants to stamp it's mark and in 2020, when COVID-19 reared its ugly head, the firm naturally jumped onto the vaccine bandwagon.

The company does not want to be left behind and naturally invested millions of ringgit to set up vaccine manufacturing facilities.

"And now the pandemic has tapered off and almost 100 percent of Malaysians are vaccinated two three times over.

Many of its vaccine stockpiles are languishing at its storerooms nearing expiry with no visible markets in sight," an industry source who declined to be identified told DagangNews.

Is this a case of bad management by its board?

An investment gone wrong by the company's board of directors? A case of biting more than it can chew?

Was Pharmaniaga strong armed by the government?

Understandably, 2020 was a traumatic year for the country and all hands were on deck to battle the virus.

In an all-out war against the pandemic, was it possible that Pharmaniaga as a GLC was instructed by the authorities to roll out more vaccines? 

Did the government order too much vaccines from Pharmaniaga with supply surpassing demand? The government should clear the air.

To be pressured by operational costs

Industry sources said what is of most concern right now for Pharmaniaga is the year ahead and even 2024.

It will be saddled with daily operational costs in the coming year.

Pharmaniaga is a manufacturing, warehousing and distribution concern employing hundreds of workers. 

Will it be able to maintain operations under financial pressure? Does it have enough cash pile to sustain operations?

Will the government become its white knight?

Fundamentals still solid

Whichever way, Pharmaniaga's fundamentals is still rock solid as its majority shareholders are Boustead Holdings Berhad and Lembaga Tabung Angkatan Tentera.

Furthermore, Pharmaniaga owns several concessions to supply all sorts of medical equipment to most government hospitals in the country as well as a few individual clients.

As such, demand for medical supplies will always remain robust in the years ahead as Malaysia is an aging society.

The company may bleed financially in the next few years but eventually it will clamber out of its PN17 status within the next 20 financial quarters or so.

It must now comply with all of Bursa Malaysia's instructions to come up with a turnaround plan.

The company must now focus on finding a regularisation plan to winch itself out of this financial quagmire and to regain investors trust. – DagangNews.com