KUALA LUMPUR (July 18): Alpha IVF Group Bhd (KL:ALPHA) is set for stronger earnings growth in the next 12 months, while analysts continue to recommend investors to buy shares in the fertility care company on attractive valuations.

Net profit of RM55 million for the financial year ended May 31, 2024 (FY2024) came in within expectations, according to the two sole research houses covering Alpha IVF. As for FY2025, UOB Kay Hian is forecasting a net profit of RM64 million, while AmInvestment Bank is projecting RM67.9 million.

Both research houses have a 'buy' call on the stock.

“FY2025 should continue to excite with attractive growth and the launch of regional facilities,” said UOB Kay Hian, which has a target price (TP) of 40 sen for Alpha IVF. “We like Alpha IVF for its industry-leading success rates, growth off a low base, and superior margins relative to its peers.”

Shares in Alpha IVF have barely changed since the company’s listing in March. The company’s initial public offering (IPO) grossed RM466.5 million, the largest ever for an ACE Market listing. Alpha IVF raised RM116.6 million from the IPO for expansion, while its selling shareholders got RM349.9 million.

The company mainly focuses on assisted reproductive services, with a strong emphasis on in-vitro fertilsation (IVF), a medical procedure where eggs are collected and fertilised by sperm in a laboratory, before implanted in the womb. The company currently operates two centres in Malaysia and one in Singapore.

The stock was unchanged on Thursday morning at 32 sen, valuing the company at RM1.56 billion on Bursa Malaysia, after more than 11.2 million shares changed hands.

Alpha IVF’s current below-peer valuation is “unjustified”, AmInvestment Bank said, citing the company's advantage in a region with low IVF penetration rates, “best-in-class” clinical pregnancy rates, “superior” profit-after-tax margins compared to local and regional peers, and opportunities to tap into Indonesia’s market.

The house has a TP of 42 sen for Alpha IVF, based on 28 times forward earnings, representing a premium of 13% against local peers and 37% versus regional peers. The stock is also AmInvestment Bank’s preferred pick for the healthcare sector.

UOB Kay Hian also said that Alpha IVF should trade at a premium against its competitors, given its higher-than-average growth potential, attractive growth, and clinical success rate in the region.

Further, Alpha IVF’s profit margins of 32% for FY2024 to FY2026 are more than double the average of its regional peers, and well ahead of the next highest margin at 23.7%, UOB Kay Hian added.