UG Healthcare

UG Healthcare: UG Healthcare was featured on The Edge magazine over the weekend, where more light was shared on the group’s plans going forward, following the recent announcement of its FY15 results.

To re-cap, UG Healthcare’s net profit ditched 35.4% y/y to $3.2m, dragged by IPO costs of $0.8m, and higher marketing costs which surged nearly three-fold to $1.3m, as the group sought to expand its distribution network in UK, China and Nigeria.

UG Healthcare guided that the increase in expenses were necessary in preparing the firm for its next phase of growth in FY16.

With the group’s products mostly priced in USD and costs largely in ringgit, the group was widely expected to benefit from the depreciation of the ringgit, which has fallen ~34% versus the USD over the past year. Yet, the group registered fair value loss on financial derivatives, as ~40% of its sales were hedged via forward contracts as at end-Jun. Going forward, management is guiding for these losses to be reduced.

Management aims to expand its global footprint, especially in the emerging markets, where the per capita glove consumption could be as low as 3% of developed markets. On that front, the group wants to have full control over its supply chain, which will enable it to customise products more effectively to client’s needs.

UG Healthcare intends to raise its annual production capacity to 1.9b pieces of gloves by end-FY16 from the current 1.5b, while also upgrading some of its existing production facilities, which will enable it to effectively meet more client demands. The group has a current utilisation rate of 80-85%.

At the current price, UG Healthcare trades at 13.7x FY15 P/E versus Riverstone’s 20.0x trailing P/E.