Apex Healthcare Bhd’s (AHB) 1QFY13 results were largely within our expectations. Its PBT of MYR12.2m accounted for about 25.1% of our full-year estimate, while 1Q net profit rose 44.2% y-o-y to MYR9.1m, due to an exceptional capital gains tax charge of MYR2.5m incurred in 1QFY12. Excluding the non-recurring item, net profit growth would have normalized to 3.0% y-o-y. It was still a good start for FY13, with 1Q results  generally  higher  q-o-q  amid  better  margins  from  its  own  brand  products.  We  are  leaving  our  FY13  forecasts  unchanged  and introducing  our  FY14  numbers.  We  roll  over  our  valuations  to  FY14f  with  a  revised  MYR4.60  FV,  pegged  to  a  higher  average  P/E  of  12x. Maintain NEUTRAL. The company is still in a net cash position, with net cash per share of 66.9 sen.  
 
Within expectations. AHB’s 1QFY13 results were in line with our expectations, with MYR12.2m PBT accounting for about 25.1% of our full-year target.  Revenue  was  relatively  flat  at  MYR106.4m  y-o-y,  while  net  profit  rose  44.2%  to  MYR9.1m  due  to  a  non-recurring  capital  gains  tax charge of MYR2.5m in FY12 upon the completion of the disposal of its China investment. Excluding the one-off item, net profit growth would have normalized to 3.0% y-o-y.  
 
Higher q-o-q results, margin improves.  AHB reported better q-o-q results. Net profit climbed 15.4% q-o-q on a 10.8% q-o-q revenue increase, while  1QFY13  EBIT  margin  improved  to  11.6%  from  10.3%  in  4QFY12.  The  better  margin  was  attributed  to  better  sales  and  higher  margins from its own brand products such as Xepa, AVEX, AVO and Agnesia.  
 
Updates  on  orthopaedic  venture.  Its  40%  JV  company,  Abio  Orthopaedics  Sdn  Bhd  (AOSB),  has  been  officially  recognized  as  an  Entry  Point Project (EPP) under the Economic Transformation Program (ETP) in March this year. Currently, AOSB is renovating its 75,000-sq-ft plant in Prai, Penang, with the installation and commissioning of machinery and equipment expected to commence in 2Q. AHB teamed up with November Union Sdn Bhd (NUSB) to manufacture surgical-grade orthopaedic devises, components and surgical instruments in December last year.  
 
Maintain NEUTRAL,  FV revised to MYR4.60. We like  AHB as a low beta company  with stable  share price movement due to the nature of its business that has inelastic demand. Nevertheless, we are keeping our  NEUTRAL call on the company with a projected  gross dividend yield of 4.6%  and  a  net  dividend  yield  of  3.4%.  We  are  leaving  our  FY13  forecasts  unchanged  and  introducing  our  FY14  forecasts.  We  roll  over  our valuations to FY14F with a revised MYR4.60 FV, pegged to a higher average P/E of 12x. The company is still in a net cash position, with net cash per share of 66.9 sen. 

Source: RHB