Apex Equity Holdings (Apex Equity) reported a 15.5% decline in 4QFY22 net profit to RM2m, mainly due to lower brokerage income on lower securities transactions. For full-year FY22, core net profit of RM6.1m was above our expectations, accounting for 108% of our forecast. This was mainly due to higher-than-expected brokerage income. Given uncertainties surrounding global economies amid the rising interest rate environment, we believe equity markets would remain sluggish in the medium term. As such, we retain our FY23-24F earnings forecast. We maintain our Neutral rating on Apex Equity. As we roll forward our valuation base year to FY24F however, our TP is revised to RM1.15, based on 0.7x PBR.

• FY22 revenue and net profit fell 59.3% YoY and 70.2% YoY, respectively. The decline was mainly due to a drop in brokerage income and securities transactions. The stock and securities broking segment contributed to 91% of the group’s total revenue. The weaker performance was due to waning investor confidence and risk appetite in shares, with the FBM KLCI falling by 4.6% YoY.

• Change in shareholding and senior management. ACE Credit (ACE) has ceased to be a substantial shareholder after disposing of a 13.34% stake in the open market. Previously, ACE was the second largest shareholder with a 14.98% stake. In December 2022, the Securities Commission sought a court order to refrain ACE from taking control of Apex Equity. Following this, Dato’ Choong Chee Meng and Madam Chang Ai Nee have resigned as the Group Managing Director and Strategic Advisor of Apex Equity (both are directors of ACE Group). Meanwhile, Farhash Wafa Salvador was appointed as the Group Executive Chairman of Apex Equity.

• Outlook. As Apex Equity derives the bulk of its income from the stockbroking business, its growth prospects will be dependent on the vibrancy of our domestic capital market. Year to-date, total trading volume and value on Bursa Malaysia has declined by 56% YoY and 46% YoY respectively. For FY23F, we forecast earnings to increase by 8% YoY, as we expect market sentiment to improve, particularly in 2H2023, when effects of interest rate hikes taper off.

Source: PublicInvest Research - 28 Feb 2023