KUALA LUMPUR (March 4): Mercury Securities Sdn Bhd has a “subscribe” recommendation on fertility care company Alpha IVF Group Bhd with a fair value of 37 sen based on financial year 2024 (FY2024) forecast earnings per share (EPS) of 1.5 sen and a peers average price-earnings (PE) of 24.8 times.

In a note on Monday, the research house said it likes the stock for its attractive expansion plan, and proven track record in a niche market on the back of a recovering healthcare travelling industry that has grown at a compound annual growth rate (CAGR) of 27.5% from 2020 to 2022 (Vital Factor).

It said the target price represents a potential return of 15.6% over the initial public offering (IPO) price of 32 sen.

The IPO is backed by eight of the so-called cornerstone investors, including AHAM Asset Management, Eastspring Investments Bhd, Lion Global Investors Ltd and Value Partners Hong Kong Ltd, according to the prospectus launched.

Mercury said Alpha IVF also plans to upgrade its existing facilities through efforts such as: (i) investing RM8.5 million on new lab and medical equipment, funded via IPO proceeds, (ii) allocating RM4.1 million on IT system enhancements, (iii) renovation and expansion plan for existing facilities in Selangor and Penang, costing RM2.2 million, increasing space for patient records and waiting areas, (iv) expansion of existing corporate office with an estimated cost of RM1 million, set to be completed within 36 months commencing in the first to second quarter of 2024.

“Risk factors: (1) Dependency on skilled personnel, (2) Reliance on certain approvals, licences, permits and certificates, (3) Subject to risks of medical and legal claims, regulatory actions, (4) Dependency on ARS (assisted reproductive services) medication suppliers,” it said.

The offering will close on March 8, and the listing is scheduled for March 22.

Source: TheEdge - 5 Mar 2024