Apex Equity Holdings (Apex Equity) reported a 10.2% decline in 1QFY23 net profit  to RM1.95m, as an increase in loan interest income was offset by lower brokerage  income. The results were broadly within our expectation, coming in at 30% of our  full-year estimate. Given the weak domestic economic conditions amid the rising inflationary pressures and political uncertainties, we believe the equity market will remain sluggish this year. We maintain our earnings forecasts, projecting a growth  of 2.8% in FY23F. We reiterate our Neutral rating on Apex Equity with an unchanged TP of RM1.15, based on 0.7x PBR.

• 1QFY23 revenue rose 6.6% YoY but net profit was down 10.2% YoY, as the  increase in loan interest income was offset by a drop in brokerage income and  securities transactions. The stock and securities broking segment contributed  to 84% 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 5.7%.   
• 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 value on Bursa Malaysia  has declined by 20% YoY while volume was flat. For FY23F, we forecast core  earnings to increase marginally by 2.8% YoY.

Source: PublicInvest Research - 25 May 2023