9M15 results were below our expectations, with core earnings of MYR20.4m (-16.1% YoY) coming in at only 59.0% of our full-year estimate. We reduce our FY15-17 earnings forecasts by 11-15% to reflect a slower turnaround in its associate and higher cost assumptiondue to continued weakness in the MYR. Maintain NEUTRAL with a lower TP of MYR3.35 (from MYR3.89, 9.5% downside) based on an unchanged 12x P/E to FY16F EPS.

Disappointing results. Apex Healthcare’s (Apex) 9M15 results were below our expectations, with core earnings of MYR20.4m (-16.1% YoY)coming in at only 59.0% of our full-year estimate. Despite higher 3Q15 revenue of MYR128.3m (+4.7% YoY), PBT declined 24.9% YoY to MYR7.7m in 3Q15. This was mainly due to the share of losses of MYR0.7m in its associate company, Straits Apex SB (SA), higher cost of goods sold due to a weaker MYR as well as higher expenditure for the development of new products and new international markets.

Outlook. Although we expect revenue growth of Apex’s core segments to remain stable, we are concerned that in the near to medium term, its profitability could be adversely impacted by the continued weakness in the MYR and the possibility of a longer turnaround for SA.

Earnings revisions. We reduce our FY15-17 earnings forecasts by 14.8%/13.9%/11.6% respectively by assuming a longer turnaround in SA and higher cost assumption. Key risks to our forecasts include a slowerthan-expected turnaround in SA and higher-than-expected cost of sales.

Maintain NEUTRAL with a revised TP of MYR3.35. We maintain our NEUTRAL call with a lower TP of MYR3.35 (from MYR3.89, 9.5% downside) based on an unchanged 12x P/E to FY16F EPS. Apex has net cash per share of about 50.0 sen as at end-September. This implies ex-cash FY16F P/E of 10x based on our TP.