MDS Reports Higher Net Profit Primarily due to Business Acquisition

• For its financial year ending March 2021, Medical Disposables and Supplies Limited (MDS) reported a net profit $69.61Mn (EPS: $0.26), which translates to 101.4% (or $35.06Mn) increase over the same period last year. This was primarily due to the $62.08Mn gain realized on the acquisition of Cornwall Medical and Dental Supplies Limited. MDS now owns 60.0% of the company, and will carry the operation through a newly formed subsidiary called Cornwall Enterprise Limited. 
• Gross margin rose 7% reflecting a 5.1% reduction in cost of sales, which offset the impact of a 2.4% decline in revenues earned from the sale of the company’s products.  
• However, administrative, selling and promotional, as well as finance costs all increased by 4.3%, 22.0%, and 45.6%, respectively. Consequently, the company would have realized a year over year decline in net profit of about $22Mn, if the effects of the one-off gain from business acquisition is excluded. 
• The acquisition of Cornwall Medical and Dental Supplies Limited is expected to increase the company’s market share and expand its distribution network as it will add three pharmacies in the western section of the island, and begin offering dental services. This bodes well for future revenue and bottom-line growth in terms of the new clients acquired and the ability to cross-sell dental services to existing clients. 
• MDS stock price has risen by 18.2% since the start of the year and currently trades at a P/E ratio of 19.2x earnings, which is below the junior market distribution sector average of 26.4x earnings.

(Source: Company Financials & NCBCM Research)