Bioalpha Holdings Bhd
(April 5, 25.5 sen)
Maintain add call with a target price of 37 sen: Last week, Bioalpha Holdings Bhd had a soft launch of its new franchise business e-Constant (eC) which allows customers to buy pharmacy healthcare products online and register as referral agents. The said agent will own an eC virtual shop and sell the products through a referral mechanism.
Constant Pharmacy will manage the product orders and deliveries. Referral agents will be rewarded with cash points for each successful referral sale. The points can be used as cash value for their next purchase.
The eC is a project between Constant Pharmacy and Angkatan Koperasi Kebangsaan Malaysia Bhd (Angkasa) members only. Angkasa is the national co-operative organisation of Malaysia with 12,000 co-operatives and eight million members nationwide.
Bioalpha and Angkasa have a 70:30 joint venture company, Alphacare Sdn Bhd, which is involved in the management of Constant Pharmacy. The eC business would be managed by Alphacare Sdn Bhd.
The eC soft launch was a pleasant surprise to us. In our view, eC has great potential with eight million members in Angkasa. We believe management is likely to start marketing eC soon to the larger co-operatives. We have not assumed any potential earnings from eC.
Angkasa members who want to join eC must register with their respective company’s co-op. Members can build their individual businesses via referrals. The respective co-op also gets some income from the members’ sales through eC and Bioalpha gets to boost its pharmaceutical and home brand sales. So, it looks like a win–win deal for everybody.
With the new plant in Pekan, Riau, new product approvals for Bioalpha in Indonesia should only take three to six months versus two to three years previously. Bioalpha has been marketing its products in north-western China, where most Muslims reside.
We estimate that about 100 million Muslims live in China and Jakim’s halal logo is well respected there. Bioalpha currently sells five products in China and plans to launch three new products here in the first half of 2017 (1H17) and another two in 2H17. In financial year 2016, China and Indonesia contributed 40% and 41% of Bioalpha’s group revenue. — CIMB Research, April 4