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Could Haw Par Corporation Be A Value Pharma?

stethoscope doctor healthcareSingapore has six quoted companies that are focused on the pharmaceutical industry.

The products in their medicine cabinets range from bioengineered drugs to Traditional Chinese Medicines (TCM). It even includes vaccines for livestock and crop-care chemicals.

Singapore’s quoted pharmaceutical companies still have a long way to go before they challenge the likes of America’s Pfizer, Anglo-US’s GlaxoSmithKline and Europe’s Roche. But that doesn’t rule them out as potential investment opportunities.

Whilst Western pharmaceutical tend to be popular income shares, they often trade at high multiples of their earnings. For example, Merck & Co and AstraZeneca are valued at 38 and 45 times earnings, respectively.

Haw Par (SGX: H02) is Singapore’s largest pharma. Its dividend yield is 2.3% and it is priced at 0.7 times book value.  But it is valued at over 16 times earnings.

Meanwhile, Zagro Asia Limited (SGX: Z01) is one of Singapore’s smallest pharmas. It is involved in the manufacture and distribution of crop care and animal health care primarily in Asia. Its products include crop nutrition, fertilisers, herbicides and almost anything else that farmers might need to maximise crop yields.

The company also offers products used to control mosquitoes and cockroaches.

Zagro trades at around eight times earnings, which is lower than the average for Singapore’s listed pharmaceuticals. It is also below the overall market average of 14. Zagro has one of the best dividend yields of the pharmaceuticals at 3.1%. It also trades at close to its book value.

However, with a market value of just S$84m, Zagro, might be seen as a riskier investment than say, the S$1.8b titan Haw Par.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Singapore Contributor Adam Kuo doesn’t own shares in any companies mentioned.