Malaysia: Boustead plans to cut stake in Pharmaniaga to 75%

KUALA LUMPUR: Boustead Holdings Bhd, which holds a 97% stake in Pharmaniaga Bhd, will pare down its stake to 75% or below but will continue to be the pharmaceutical company’s controlling shareholder.

“Pharmaniaga will be maintained as a listed entity and we will have to fulfil the public shareholding spread,” Boustead deputy chairman and group managing director Tan Sri Lodin Wok Kamaruddin said after Pharmaniaga’s AGM yesterday.

He said the group was “currently talking to parties” to dispose of some of its shares in Pharmaniaga. He declined to disclose details but said Boustead was in talks with both foreign and local investors.

“There are possibilities,” Lodin said when asked if Boustead would consider private placements.

He said the corporate exercise could be a “mixture of private placement or a scheme involving existing shareholders or personnel.” “Nothing has been firmed up. We will announce the details at the right time,” Lodin said, adding that the group targeted to fulfil the public shareholding spread by the end of the third quarter.

Boustead had in June 2010 proposed to buy an 86.1% equity stake in Pharmaniaga for RM534mil, or RM5.75 per share, from the UEM group in a bid to expand its pharmaceutical business. The exercise was completed at the end of March this year.

Lodin, who is also Pharmaniaga’s chairman, said the pharmaceutical group was “bullish” on its outlook, buoyed by its existing business and new products.

“There’s further room for expansion in our business and there’s room for us to increase market share in the government business. We will also be expanding regionally,” he said.

Lodin said Pharmaniaga was expected to invest RM40mil this year in capital expenditure on IT systems as well as to further improve its equipments.

Pharmaniaga managing director Datuk Farshila Emran said the group planned to expand into halal drugs and supplements.

She said the group was embarking on a programme to get its plants to be halal-certified for the purpose of halal drugs production.

“We are working on halal certification for our plants. We hope to complete the certification within two years.”

Farshila said it had recently secured a 10-year government contract to supply government hospitals with various types of drugs.

She said Pharmaniaga had a strong orderbook of RM800mil of which 60% were from government business. Its business from the private sector was relatively small but Farshila said the group had more institutional clients such as Hospital Universiti Kebangsaan Malaysia and Hospital Universiti Sains Malaysia.

The drug company has owned the concession to supply medical products to government hospitals since 1998 and the concession business generates some 60% of its revenue.

Pharmaniaga currently has a distribution operation in Indonesia and Vietnam.

To a question, Lodin said Pharmaniaga would consider setting up factories in those countries but remained non-committal.

He said Pharmaniaga could contribute some 10% of Boustead’s pre-tax profit in current financial year ending Dec 31, 2011.

Pharmaniaga could contribute at least 15% to Boustead’s group pretax profit within five years at the former expands its business.

Separately, Lodin said Boustead was not eyeing any acquisition to add to its conglomerate. He said: “Not at the moment.”

“It depends on the landscape. We’re not talking to anyone,” he said when asked if Boustead’s financial arm, Affin Bank Bhd, was looking for any merger and acquisitions.

“We’re happy with the performance because we have a good management team and the growth seemed to be very steady at 18% per year. Deposit growth was also quite strong. Generally, we’re very happy.

“At the moment its ok. We’re happy with our investment in the group,” Lodin said.