Cairo – Mubasher: Alexandria Pharmaceuticals is the stock to invest in, says MubasherTrade Research in a new note, highlighting that the state-owned company is the third-largest drug maker in Egypt.
With a market share of 17.66%, Alexandria Pharmaceuticals “enjoys stable and growing revenues, the highest [return on equity (ROE)] and net margin among its peers, supported by stable local demand and export sales,” the report showed.
The company belongs to one of the most important sectors in Egypt that is enjoying a solid growth in demand, the note showed
Historically, the drug maker’s stock has “rewarded shareholders with double-digit dividend yield,” according to MubasherTrade Research.
The pharmaceuticals industry in Egypt is one of various favourable characteristics, such as stable population growth rates, “favourable demographics, and—unfortunately—high morbidity rates,” the note says, highlighting that despite accounting for 2.3% of the country’s gross domestic product (GDP), the health sector as a whole “showed very little public expenditure (only 1.5% of GDP).”
The Egyptian government has raised public expenditure to 2.7% of GDP in fiscal year 2017/2018, in an attempt to meet the constitutional threshold of 3%, which allows state-owned healthcare providers in general and pharmaceutical manufacturers in particular, such as Alexandria Pharmaceuticals.
Media reports often show that the company secures notable orders from the Egyptian Ministry of Health.
Yet, in spite of these favourable aspects, Egypt’s pharmaceuticals industry suffers from a number of risks such as being dominated by private multinationals, and the government’s enforcement of specific drug prices.
Furthermore, around 32 of Alexandria Pharmaceuticals’ products are still being sold at a loss despite recent price hikes, added to the stock’s “low liquidity (6-month ADTV and turnover ratio are only EGP119k and 157% compared to peers’ averages of EGP1,245k and 454%),” the note showed.
Accordingly, MubasherTrade Research is opening a position in Alexandria Pharmaceuticals’ stock with a price target of EGP 137, supported by a cash yield of around 9%.
