Apex Healthcare's (ApexH) 3QFY24 net profit dropped 24.5% YoY to RM18.2m, mainly due to a higher operating expense for new product launches and expansion of Techlink and Cheng 2 warehouses. After excluding non-operating items, ApexH's 3QFY24 core net profit dropped by 24.3% YoY to RM18.4m. The results were below both our and market's expectations at 69% and 68% of full-year forecasts respectively. The discrepancy in our forecasts was due to the weaker-than-expected performance from SAG. We cut our FY24F-26F earnings forecasts by 5% to account for lower earnings contribution from SAG. All told, we reiterate our Neutral call on ApexH, with a lower TP of RM2.79 based on 19x 5-year historical mean on FY25F EPS. On a side note, ApexH declared a second interim single-tier dividend of 3.0 sen per share, bringing the total DPS to 6.0sen for FY24.

• Revenue. ApexH's 3QFY24 revenue increased marginally by 0.9% YoY to RM238.7m, underpinned by steady demand for pharmaceuticals, consumer healthcare products, and medical devices in key markets. The revenue growth was further supported by enhanced sales and marketing initiatives aimed at securing new pharmaceutical and consumer healthcare agencies for branded products. ApexH's distribution segment recorded an increase of 3.8% YoY to RM217.1m, while the manufacturing segment dropped 16.4% YoY to RM17.1m in 3QFY24.
• Net profit. ApexH's 3QFY24 net profit dropped 24.5% YoY to RM18.2m, mainly due to a higher operating expense for new product launches and expansion costs for Techlink and Cheng 2 warehouses. After excluding the non-operating items, ApexH's 3QFY24 core net profit declined by 24.3% YoY, primarily impacted by a weaker performance in the SAG segment, attributed to foreign exchange losses stemming from the strengthening of the Ringgit, as well as recognition of the Group's share of financing costs and amortisation of intangible assets.
• Outlook. We remain cautious on the impact of export disruptions stemming from ongoing civil unrest in Myanmar and persistent market uncertainties, alongside the normalisation of pandemic-related demand. However, we are confident in the Group's long-term resilience, underpinned by its robust domestic demand, the addition of new pharmaceutical and consumer healthcare agencies, and the continued rollout of new Group-branded products. All told, we reiterate our Neutral call on ApexH.

Source: PublicInvest Research - 28 Nov 2024