Investment Highlights

• We maintain our BUY call on Apex Healthcare (Apex) with an unchanged fair value (FV) of RM3.45/share, based on an unchanged PER of 23x FY22F EPS. We make no ESGrelated price adjustment for our rating of 3 stars.

• Our forecasts are maintained following an analyst briefing yesterday, which included these salient highlights: 1. Margin expansion in 4Q2021 due to better product mix. We gather that sales of products for coughs and colds have picked up as Covid-19 has evolved largely into a community respiratory illness with mild symptoms for the majority of cases. These products tend to generate better margin. Note that 4Q2021 gross profit margin has increased to 20.8% (as compared to 3Q2021 20.7%). 2. Some of the challenges foreseen in 2022 are supply chain bottlenecks, stubbornly high energy, raw materials and freight costs. Additionally, supply chain issues may delay the timing of arrival of certain raw materials. 3. The company has highlighted its focus on the following this year: i) improving its market share of pharmaceutical and consumer healthcare products; ii) rapid supply of indemand healthcare products; and iii) search for new contract manufacturing partnerships.

• We continue to like the company as: i) it has positioned itself well to benefit from the megatrends of ageing population; ii) public health education advancement; and iii) steady healthcare expenditure in Malaysia and Singapore. Also, Apex will not be affected by the prosperity tax. We forecast an FY22 PBT of RM86.4mil (less than RM100mil).

• Risks to our BUY call are weaker-than-expected demand for pharmaceutical products and lower-than-expected margin due to inability to pass on cost increase.

Source: AmInvest Research - 25 Feb 2022