Pharmaniaga Bhd., a pharmaceutical company in Malaysia, experienced a surge in its shares following the announcement of a new medical supply contract with the Malaysian government.

The company’s shares rose by up to 7.7% and were recently 2.6% higher at 0.40 ringgit ($0.09), reducing its 12-month losses to 34%.

According to a filing with the bourse on Wednesday, one of Pharmaniaga’s units has won a contract to provide medical-supply logistics services to the health ministry for a period of seven years beginning from July 1. This new agreement builds upon their previous contract, which started in December 2019.

Pharmaniaga assured that it will continue to offer its services to the ministry based on the agreed-upon terms while finalizing the specific details of the new agreement.

With regards to this development, Kenanga Investment Bank issued a note stating that it was expected but should still have a positive impact on Pharmaniaga. This new contract will provide a steady stream of income as the company endeavors to improve its financial standing.

Following a net loss in the final quarter of 2022, primarily due to a significant provision for slow-moving inventories of Covid vaccines, Pharmaniaga was classified as financially distressed in February last year. The company now has approximately eight months to submit a restructuring plan to Bursa Malaysia.

However, Kenanga IB analyst Raymond Choo Ping Khoon believes that Pharmaniaga may need to offer more competitive rates under the new contract as the government seeks greater value for its money.

Kenanga maintains an underperform rating on Pharmaniaga with a MYR0.33 target.

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