Investment Highlights

• We maintain BUY on Alpha IVF Group (Alpha) with unchanged fair value (FV) of RM0.42/share, based on an CY target PE of 28x at a 13%-37% premium compared to average valuation of 25x of local peers and 19x for regi peers. This implies a PEG ratio of 1.7, which is lower than l peers’ average of 2.9. We ascribe a neutral 3-star ESG ratin the company.

• Our forecasts are maintained as Alpha’s FY24 net profit w in line with expectations, coming in just 3% below our full- estimate and 2% of consensus. An interim dividend of 0.45 was declared, which translates to a payout of 41%.

• FY24 core net profit rose 26% YoY to RM52.9mil, supporte revenue growth of 22% to RM168mil driven by Malaysia (+2 while Singapore accounted for 19% of group revenue. This further aided by EBITDA margin rising by 2.5%, partly offse effective tax rate normalising by 6%-point to 24.9%.

• On a sequential comparison, 4QFY24 net profit increased slight 3% to RM14mil despite revenue rising by a faster pac 15% to RM47mil as Singapore rose by +20% while dome trailed at +14%. Even so, the strong revenue growth was lar offset by increased administration expenses (+72%) f Alpha’s listing exercise on 22 March 2024 together with a 2 point increase in effective tax rate.

• We introduce FY27F net profit with a growth of 16% prem on revenue growth of 14% and slightly-improved pretax ma of 37%. All in, we are projecting Alpha’s FY23-FY27F CA earnings growth at 20%, premised on revenue CAGR of that is underpinned by: i) continued recovery of for patients, ii) launch of 51%-owned Alhaya Internati Women’s Specialists on 8 April this year, and iii) organic l and overseas expansions.

• Besides setting up a new full-fledged assisted reproduc services centre in Bali as well as 4 satellite clinics in Indone Alpha plans for 2 new full-fledged domestic centres by e FY25F and end-FY26F, which could each expand by 15%- of the existing group OPU capacity of 8,000. Currently, Alph still in the process of identifying suitable locations for the centres.

• Amongst the healthcare stocks under our coverage, Alph our preferred pick. With a net cash of RM151mil (10% of ma cap), the stock currently trades at an attractive PEG of 1.4 local peers of 2.9. We believe this is unjustified given Alp strategic advantage in a region with low in-vitro fertilisa (IVF) penetration rates, best-in-class clinical pregnancy and superior PAT margin compared to local and regional pe as well as opportunity to tap into Indonesia’s health market.

Source: AmInvest Research - 18 Jul 2024