Apex Healthcare’s (ApexH) 4QFY23 net profit dropped 42% YoY to RM20.1m, mainly due to lower earnings from Straits Apex Group (SAG). After stripping off non-operating items, Apex FY23 core net profit dropped 4% YoY to RM92.9m. The results were within both our and consensus estimates at 101% and 97% of full-year forecasts respectively. We are positive on its continuous effort in launching new products under Group’s brands and acquiring new distribution agencies, but we remain cautious on the demand for Covid-related products. All told, we maintain our FY24-25F earnings forecast and our Neutral call on ApexH, with a higher TP of RM2.87 based on 19x 5-year historical mean as we roll over our valuation to FY25F EPS. ApexH declared a final and special single-tier dividend of 2.5 sen and 20.0 sen per share respectively (total dividend FY23: 25.0 sen per share).

• Revenue. ApexH reported a revenue of RM240.0m (+9% YoY) in 4QFY23, mainly attributed to the sales growth in both Malaysia and Singapore for pharmaceuticals, consumer healthcare products and medical devices. This uptick was supported by the performance of consumer distribution agencies and the emergence of a new wave of Covid-19 infections and other respiratory illnesses within the community. ApexH’s distribution segment recorded an increase of 11% YoY to RM219.8m, while the manufacturing segment slid 9.6% YoY to RM20.2m in 4QFY23.
• Net profit. ApexH’s 4QFY23 net profit declined 42% YoY while PBT margin dropped by 6.3ppts to 11.9% in 4QFY23, mainly attributed to a RM14.5m one-off expenses from divestment of SAG. We also note that the Group has recognised a non-recurring gain of RM17.4m for share of earnings of SAG. After stripping off the non-operating items, ApexH’s FY23 core net profit dropped 4% YoY to RM92.9m, mainly due to lower share of recurring earnings from SAG in 4QFY23.
• Outlook. Moving into 1HFY24, we remain cautious on the normalisation of demand for Covid-related products and potential escalation of imported raw material costs. Nevertheless, we are optimistic on the Group’s long- term prospect with its continuous effort in exploring new international markets, intensifying research and development efforts to enhance its portfolio with new pharmaceutical and consumer healthcare products, while forging new partnerships for product distribution. We are also positive on the expansion of its newly acquired industrial site in Melaka to meet future demand for its key products ie. cough and cold syrups.

Source: PublicInvest Research - 4 Oct 2024