Apex Healthcare’s (ApexH) 1QFY24 net profit dropped 12.7% YoY to RM21.2m, mainly due to lower earnings from Straits Apex Group (SAG). After stripping off the non-operating items, ApexH’s 1QFY24 core net profit dropped 17.1% YoY to RM21.0m. The results were within both our and consensus estimates at 23% and 22% of full-year forecasts respectively. We are positive on the Group’s continuous effort in exploring new international markets, but we remain cautious on the slowdown in demand for Covid-related products. All told, we maintain our FY24F-26F earnings forecast (minor adjustment due to book-keeping changes) and reiterate our Neutral call on ApexH, with an unchanged TP of RM2.87 based on 19x 5-year historical mean on FY25F EPS.

• Revenue. ApexH reported a slight increase of 1% YoY in revenue to RM248.2m in 1QFY24, primarily driven by higher sales of its core pharmaceuticals and consumer healthcare products. However, the Group observed a slowdown in demand for pharmaceuticals, consumer healthcare products, and medical devices across key markets, including Malaysia and Singapore. Despite early signs of market demand moderation, the Group managed to maintain consistent performance in 1QFY24. ApexH’s distribution segment recorded an increase of 0.7% YoY to RM222.4m, while the manufacturing segment improved 3.1% YoY to RM25.8m in 1QFY24.

• Net profit. ApexH’s 1QFY24 net profit declined 12.7% YoY while PBT margin dropped by 1.5ppts to 10.6% in 1QFY24, mainly attributed the reduced profit contribution from its associate company, SAG, following a reduction in ApexH's effective interest in SAG from 40% to 16%. After stripping off the non-operating items, ApexH’s 1QFY24 core net profit dropped 17.1% to RM21.0m.

• Outlook. While we maintain a cautious stance on the normalization of demand for Covid-related products and the potential escalation of imported raw material costs, we are optimistic on the Group's ability in navigating these challenges. This is primarily attributed to their proactive engagement in MATRADE's Mid-Tier Companies Development Program, aimed at augmenting export sales opportunities and bolstering resilience in the face of market volatilities. We are also positive on the recent acquisition of warehouse facilities in Singapore which enables Apex Pharma Marketing Pte Ltd to enhance operational efficiency.

Source: PublicInvest Research - 16 May 2024