KUALA LUMPUR (June 11): Hong Leong Investment Bank (HLIB) has maintained its “buy” rating on UmediC Group Bhd (KL:UMED), with an unchanged target price (TP) of 91 sen.

In a note on Tuesday, the research house said UMediC’s 3QFY2024 results came in below expectations, at 58% of house full year forecast and 56% of consensus.

HLIB said the negative deviation was predominantly due to lower-than-expected revenue and higher-than-expected effective tax rate.

“Hence, we cut FY2024/2025/2026 forecasts by 21%/18%/18% respectively, as we lower/raise our revenue/tax assumptions.

“Going into 4QFY2024f (forecast), we expect a quarter-on-quarter (q-o-q) improvement, supported by increased production capacity of HydroX and a promising outlook for medical devices,” it said.

HLIB said the demand outlook for medical devices remains bright, supported by a substantial increase in Budget 2024 allocation to the Ministry of Health (+13.5% year-on-year) and brownfield expansion among private hospitals.

“Hence, we expect a q-o-q improvement in both revenue and bottomline.

“Our TP represents a P/E (price–to-earnings) multiple of 26.5x against its (calendar year) CY2025f EPS (earnings per share) of 3.4 sen (versus CY2024f previously).

Strategic advantage

“Our optimism towards UMC (UmediC) remains intact, fuelled by its robust capacity expansion and strategic advantage in capitalising on the government’s commitment to increase public healthcare expenditure to 5% of GDP (gross domestic product),” it said.