We initiate coverage on Apex Equity Holdings Berhad (AEHB) with a SELL recommendation. Tagging a P/B ratio of around 0.6x to AEHB’s FY23e BV, we arrive at a fair value of RM0.96/share. Going forward, we foresee softer earnings prospects for AEHB, underpinned by headwinds of lacklustre trading volumes, intense competition and digitalisation.

Investment Merits

1. Leveraging on digitalisation and automation;

2. Committed to building a niche business model; and

3. Loyal customer base.

Earnings Forecast

We foresee a softer FY22 for AEHB, underpinned by the lower securities transactions, as market volumes on the Bursa have also fallen YoY. Our forecast also assumes that the trading velocity in the market will gradually normalise. As such, we have pencilled in a trading velocity assumption of 32/30/30% for FY22/23/24. We foresee Apex registering a lower net profit of RM7.1/8.1/9.0mn for FY22/23/24, respectively.

Valuation

For valuation purposes, we compare AEHB to listed peers with similar operations, such as Kenanga Investment Bank. Tagging a P/B ratio of around 0.6x to AEHB’s FY23e BV, we arrive at a fair value of RM0.96/share. We initiate coverage on AEHB with a Sell recommendation.

Source: TA Research - 8 Nov 2022