• Apex Healthcare (Apex) is an integrated pharmaceutical company  with operating subsidiaries in Malaysia and Singapore, as well as  offices in Vietnam and Myanmar. The company has evolved into a  vertically integrated pharmaceutical group in Malaysia, and  therefore, its involvement in manufacturing, marketing,  distribution, and retailing of pharmaceutical products.

• Higher budget allocation from both governments, Malaysia and  Singapore will bode well for Apex as the group holds a collection  of product portfolios designed for the management of NCDs under  its own brand, and the brands of its esteemed business partners  for which they act as an agency.

• Apex does not have an official dividend policy. However, it has  declared a dividend payout ratio of above 30% of PATAMI for the  past 4 years. In FY22, its dividend payout ratio reached 40%, equivalent to 8.5 sen per share or a yield of 2%.

• Apex Healthcare is currently trading at PER of 17.7x, which is  slightly higher than its historical average PER of 17x, suggesting  that the stock is fully valued. We are sanguine on the group’s  outlook however as we believe Apex’s earnings will continue to  be supported by its solid execution strategy and resilient demand  for pharmaceutical products.

Company Background

Apex Healthcare (Apex), founded by Mr. Kee Tah Peng @ Hee Teck  Peng, started as a retail pharmacy outlet called Apex Pharmacy Pte Ltd  in Melaka in the early 1960s. By 1966, the company had expanded to  become the first pharmacy chain in Malaysia with the opening of a  second outlet in Kuching, Sarawak. In 1998, Apex Healthcare Berhad  (ApexH) was established in Malaysia as a public company under the  Companies Act, 1965, and was listed on the Second board in 2000  before moving to the main board in 2003. Today, Apex is an integrated  pharmaceutical company with operating subsidiaries in Malaysia and  Singapore, as well as offices in Vietnam and Myanmar. The company  has evolved into a vertically integrated pharmaceutical group in  Malaysia, with involvement in manufacturing, marketing, distribution,  and retailing of pharmaceutical products.

Straits Apex as one Apex’s earnings generator

Apex Healthcare acquired a 40% share in Strait Apex Sdn Bhd, a  contract manufacturer of orthopaedic devices located in Penang, in  2013. Straits Apex Sdn Bhd produces high-quality orthopaedic devices,  components, and surgical instruments for leading orthopaedic  companies. Note that, Straits Apex growth trajectory is supported by  orders from both new and existing multinational customers. It is worth  to note that its production space was expanded by 30% during the  4Q22 with commercial production expected in first quarter of 2023  after the production equipment has been validated.

Source: BIMB Securities Research - 30 Mar 2023