Apex Healthcare (ApexH) posted a record high net profit of RM34.8m (+68.3% YoY) in 4QFY22. The stronger performance was mainly driven by higher sales of respiratory medicines especially the cough and cold products. Share of earnings from associated company, Straits Apex Group (SAG), has also contributed to the increase in earnings at RM14.5m (+158% YoY) in 4QFY22. After stripping off non-operating items, full year FY22 core net profit was RM96.8m, beating expectations at 133% and 118% of our and consensus full year forecasts respectively. ApexH declared a final and special dividend of 3.5 sen and 2.0 sen per share. Additionally, the group has also proposed to undertake a 1:2 bonus issue for existing shares without capitalising reserves. Our earnings forecasts are under review with an upside bias, pending our meeting with management. At this juncture, we maintain our Neutral call on ApexH, with an unchanged TP of RM3.31.

• Stronger revenue. ApexH’s revenue stood at RM220.5m (+11.6% YoY) in 4QFY22. The increase was mainly due to stronger contributions from its manufacturing and marketing segment (46.7% YoY) as well as its wholesale and distribution segment (8.7% YoY), on the back of a strong market demand for respiratory illness related products in Malaysia, Singapore and international markets. This was mainly attributed to the prevalence of COVID-19 infection in 2HFY22. The steady growth in revenue was also due to the group’s timely expansion of production capacity, rapid sourcing and supply of changing in-demand healthcare products in the existing market.

• Net profit. In tandem with higher revenue, ApexH’s 4QFY22 net profit jumped by 68.3% YoY to RM34.8m. Stripping off the reversal of RM4.2m impairment for SAG, core net profit was at RM30.7m in 4QFY22 (+48.1% YoY). The stronger net profit was backed by a higher share of profits from SAG at RM14.5m in the current quarter from RM5.6m in 4QFY21, mainly due to the uninterrupted production which allowed SAG to clear its order backlogs to meet growing demand on new orders from customers. In addition, PBT margin improved by 3.9ppt YoY to 14% in FY22.

• Outlook. We believe ApexH will benefit from the favourable demographics and the increase in ageing population over the long run. The group should continue to generate higher sales and grow its market share of group brand products through R&D intensification in key therapeutic categories to broaden its new product pipeline. However, we remain cautious on cost pressure due to rising imported raw material prices due to the supply chain disruption and inflationary pressure in the near term.

Source: PublicInvest Research - 23 Feb 2023