Alpha IVF Group Bhd (Alpha,0303) is set to make its debut on Bursa Ace Market today. Alpha is a fertility care specialist, providing assisted reproductive services (“ARS”), focusing on in-vitro fertilisation (“IVF”) in Malaysia and Singapore. Premised on its (i) ability to ride the recovery of medical tourism, particularly from Indonesia and China; (ii) exponential expansion plans locally and regionally; (iii) additional headcount of medical specialist team, we expect Alpha to register core net earnings of RM53.8m and RM65.5m for FY24 and FY25, respectively. BUY with a FV of RM0.34 based on 25x over FY25 EPS, which aligns with Bursa Malaysia healthcare service providers.

Revenue contribution from foreign patients to its operations in Malaysia accounted for approximately 40% in FY23, primarily from Indonesia and China. This trend underscores Alpha's capability in attracting foreign patients, supported by its stringent regulation adherence, comprehensive service quality, competitive package offerings, and linguistic accessibility. The exponential jump in earnings for FY23 clearly illustrates the importance of foreign patients post-Pandemic thus the potential for further improvements since Alpha has appointed 62 medical tourism facilitators to help coordinate foreign customers.

With a track record spanning 13 years, Alpha's ARS business is supported by 3 specialist centres located in Selangor, Penang, and Singapore. Alpha intends to further expand its core competency in IVF by setting up (i) 3 ARS specialist centres in Malaysia, with Alhaya KL, already licensed and targeted to commence operations in 1QCY24; (ii) 1 new specialist centre and 4 satellite clinics in Indonesia, aim to commence operation between the end of FY25 and FY26; (iii) 1 specialist centre in either Cambodia or Laos by end of FY25; (iv) 2 sales representative offices in China by the end of CY24.

Alpha plans to hire an additional medical specialist and 18 other personnel to support the opening of New Centre A and B in Malaysia, scheduled to commence operations by the end of FY25. The additional medical specialist is expected to drive the growth for ARS, including Oocyte Pick-Ups (“OPUs”) and embryo transfer procedures.

Alpha is currently in a net cash position with RM27.5m and has healthy cash flow generation capabilities. We expect Alpha to pay dividends of 0.7 sen and 0.8 sen for FY24 and FY25 respectively, which translates into yields of 2.1% and 2.5%.

Source: Rakuten Research - 22 Mar 2024

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