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PublicInvest Research

Author: PublicInvest   |   Latest post: Thu, 2 Jul 2020, 10:24 AM

 

Apex Healthcare Berhad- Overall Still Healthy

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Apex Healthcare’s (ApexH) posted a net profit of RM14.4m (+26.1% YoY) for 1QFY20, which was in line with both our and consensus forecasts at 23% and 21% respectively. The stronger bottomline was achieved despite start-up costs incurred by SPP Novo, its oral solid dosage plant. While the Covid-19 outbreak has led to stronger demand for pharmaceuticals and healthcare products in 1QFY20, however a dragged out pandemic impact, in our view, might still impact pharmaceutical companies like ApexH as it alters the business environment and disrupts supply chains. We roll over our valuation to FY21F EPS and our TP is subsequently revised to RM2.45. We maintain our Neutral call on ApexH.

  • Continues to grow. ApexH delivered a revenue of RM193.3m (+8.5% YoY) in 1QFY20, predominantly due to the stronger contribution from its wholesale and distribution segment, which increased by 9% YoY. Its manufacturing and marketing division, however, posted weaker revenue growth of 2% YoY. Profit contribution from its 40%-owned associate company, Straits Apex, also grew by 37% YoY to RM1.1m. The strong growth in Straits Apex’s 1QFY20 contribution was also partly due to a more favorable USD/MYR exchange rate, as more than 90% of its sales are denominated in USD. Apart from that, we can also attribute the strong YoY growth to low base effect, as Straits Apex recorded lower sales in 1QFY19. In tandem with both its topline growth and better contribution from Straits Apex, ApexH reported a net profit of RM14.4m, up by 26% YoY, despite the fact that SPP Novo is still in its gestation period and continues to incur start-up expense.
  • Business as usual even during MCO. Even with the recent MCO implemented in Malaysia, ApexH and Straits Apex’s operations were not impacted as the both of them were given the greenlight by MITI to operate, considering that they were deemed as essential service providers. ApexH’s subsidiaries were also allowed to operate during the Circuit Breaker, albeit with lesser manpower, as its subsidiaries were also classified as essential service.
  • Earning accolades. On a brighter note, ApexH’s manufacturing arm, Xepa Soul Pattinson (M) SB has obtained its second European Union Good Manufacturing Practice (EU GMP) certification, specially for its oral solid dosage plant, SPP Novo. Xepa has also obtained GMP clearance from the Australian Therapeutic Authority as well as Good Distribution Practice for Medical Devices granted by the Medical Device Authority of Malaysia.

Source: PublicInvest Research - 22 May 2020

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