BioAlpha surges with record 2.2b shares done

At 5pm, it was up 13 sen to 31 sen with a record 2.2 billion shares done, which was double its issued shares of 1.04 billion units.

At 31 sen, it is trading at a price-to-earnings of 34.44 times.

Its warrants surged more than the shares, climbing 18.5 sen to 25.5 sen with 693.50 million shares.

The shares and warrants totalled 2.89 billion units traded and accounted for 23.83% of the total trading volume of 12.12 billion shares. This was the second highest volume on Bursa Malaysia since the 12.29 billion shares done on July 20.

The integrated health supplement company had secured the contract to supply health food to the public and private sectors in China over five years.

Bioalpha said its wholly owned Bioalpha (HK) Ltd had entered into a partnership agreement with two Chinese partners, Guizhou Yuhexin Trading Ltd and Hainan Shifengfu Co Ltd. Bioalpha HK also entered into a supply contract agreement with Guizhou Yuhexin.

CGS-CIMB Equities Research said Bioalpha will mainly source the required raw materials in China, based on a determined formulation. These products will be supplied directly to GHYX, which will conduct further processing (if necessary) and packaging activities.

For the annual contract value of RM426.7mil, it said Bioalpha will supply up to 100 SKUs of active ingredients and formulations.

“We understand that the effective GP margins for this contract for Bioalpha will be in the region of 2-3%, given the nature of the job.

''“We raise our FY20-22F EPS by 86-168% to account for this agreement, which was announced today. In our assumption, we input a flat annual contract value of RM426.7m for the forecast period, with an unchanged GP margin of 2.75%.

“We also input a larger share base of 1.04bn to account for the recently completed 10% private placement.

“We upgrade Bioalpha to an Add from a Hold, with a higher TP of RM0.24 (on a fully-diluted basis). This is based on a higher P/E of 15 times CY21F P/E, at a 40% discount (50% previously) to our consumer sector target CY21F P/E of 25 times.

“Note that, the discount is to account for its smaller market cap and higher earnings volatility, ” CGS-CIMB Research said.