ALPHA : Buy the dip

Leading fertility care specialist. Listed in March 2024 on the ACE Market, ALPHA specializes in fertility care, primarily offering assisted reproductive services (ARS). The company operates three centres in Malaysia and one in Singapore. More than 90% of the group's revenue comes from the ARS segment, with 80% contributed by its Malaysia operations.

Riding on the anticipated growth in medical tourism. Fertility treatment is the 11th most sought-after treatment for healthcare travellers in Malaysia due to its high success rate and relatively low cost. This positions ALPHA to capitalize on the seasonally strong influx of foreign arrivals in the 2HCY24 and the anticipated robust growth of healthcare tourism in Malaysia over the long run, as the medical tourism revenue is projected to grow from RM1.3bn in 2022 to RM5bn by 2030. Given that ALPHA boasts a superior pregnancy rate/success rate of up to 87.5%, compared to regional peers’ rates of 46.6-72.5%, ALPHA’s outstanding track record allows the group to attract a continuous influx of foreign tourists seeking fertility care specialties. Notably, 47% of ALPHA’s 9MFY24 patients are foreigners, with Indonesians accounting for 72% of this segment.

Fertility treatment – A solution that modern society needs. The demand for fertility treatments is increasing as women are choosing to have children later in life. In Malaysia, similar to Singapore, the mean childbearing age has risen steadily from 29.5 years in 1970 to 31 years in 2022, and this trend is expected to continue due to higher education levels and greater workforce participation among women. This shift creates a favourable market for its ARS segment. Notably, a woman’s most fertile years are between her late teens and late 20s, with fertility declining significantly after age 30. Furthermore, Malaysia’s government has introduced supportive incentives, such as tax relief and EPF healthcare withdrawals, making fertility treatments more accessible to the general population.

Buy the dip.  With the share price currently trading below its IPO price of RM0.32 and stronger earnings anticipated by consensus going forward, we believe the risk-reward ratio for ALPHA is attractive. Technically, ALPHA is trading at a strong support region of RM0.30-0.31. Cut loss at RM0.28.

Collection range: RM0.30-0.305-0.31

Upside targets: RM0.33-0.35-0.38

Cut loss: RM0.28

Source: Hong Leong Investment Bank Research - 12 Jun 2024