Templeton Frontier Markets Fund cuts ownership rate in DHG

July 29, 2017 | 11:24

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A group of foreign investors related to Luxembourg-headquartered Templeton Frontier Markets Fund have reduced its ownership rate in Vietnam’s biggest publicly traded drug maker, Hau Giang Pharmaceutical JSC (DHG), by 0.53 per cent to 10.55 per cent.

Products of DHG

DHG now has Taisho Pharmaceutical Holdings, one of the five biggest pharma firms in Japan, as a big foreign shareholder with 24.5 per cent, followed by FTIF Templeton Frontier Markets Fund. SCIC is the biggest stakeholder with 43.3 per cent.

As Vietnam’s biggest publicly traded drug maker, DHG pulled in consolidated net revenue of over VND1.8 trillion ($81.8 million) in the first half of 2017, up 7 per cent on year.

According to Viet Capital Securities Joint Stock Company (VCSC), DHG's in-house sales in the first half of 2017 grew a mere 2 per cent year-on-year. Sales did not recover as well as were expected following a weak first quarter 2017, which was partly disrupted by a change in DHG’s delivery model.

Major product lines such as painkiller (Hapacol) and antibiotics (Klamentin) posted low single-digit growth in the first half of 2017 compared to the first half of 2016. Best performers were vitamin supplements, with some products growing double-digits, but this category only contributed less than 10 per cent to total sales.

DHG’s lackluster sales in the first-half of 2017 could be attributed to stiffening competition in the over-the-counter (OTC) channel amid a lack of product differentiation, customers, retailers, are still adapting to DHG’s new delivery model that requires larger but less frequent orders and some production lines were put on pause in the half of 2017 as required by the upgrade of the effervescent line to Pharmaceutical Inspection Co-operation Scheme (PIC/S) standards.

"Though the effective tax rate should rise going forward, it has trailed our expectation. Apart from a production ramp-up at the new tax-free factories, a deferred tax of VND11 billion ($0.5 million) created a net tax benefit of VND8 billion ($0.4 million) in the first half of 2017. We expect effective tax rate to rebound in the second half of 2017 and 2018 as an upgrade of the effervescent line (Hapacol) to PIC/S requires a relocation of the vitamin supplement line back to its old factory, which has no tax break," said Dao Nguyen, VCSC senior analyst.

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