Public Invest Research retains neutral for Apex Healthcare

The new factory, when completed in early 2018, will double the size of its production floor space. The planned oral solid dosage manufacturing facility will help the group increase its production capacity and capabilities.

KUALA LUMPUR: Public Invest Research is retaining its earnings estimates for Apex Healthcare and maintains Neutral with target price of RM7.58 based on 15 times multiple to FY19 EPS. 

The research house said on Friday it continues to like ApexH for i) additional capacity from its new Oral Solid Dosage (SPP NOVO) manufacturing facility, ii) strong balance sheet with net cash position, and iii) synergistic relationship with a number of multinational drug companies and wide distribution network for pharmaceuticals, over-the-counter and consumer products in Malaysia.

ApexH reported a 32.2% on-year increase in 3QFY18 net profit to RM14.9mil. Cumulatively, 9MFY18 net profit also increased by 32.0% on-year to RM41.8mil, which was in line with the research house’s full-year estimates at 77% but above consensus at 81%. 

“The positive set of results is the fruit of ApexH’s focus on developing more group-branded products that yield higher margins on top of consistent performance in its marketing and distribution of pharmaceuticals and consumer healthcare products,” it said. 

ApexH’s 2QFY18 revenue increased by 4.8% on-year, driven by private sector sales of pharmaceutical and consumer healthcare, especially its own-branded products. 

Higher contract manufacturing and public sector pharmaceutical sales in Malaysia and Singapore also contributed to the higher revenue. 

Operating, pretax and net margins were better at 9.9%, 11.3% and 9.0% respectively (compared to 8.0%, 8.4% and 7.1% in 3QFY17), boosted by growth in higher margin products in its sales mix. 

“This is in line with the group’s shift towards growing own-branded products to enhance margins. We expect the increased margin levels to be sustainable in the coming quarters,” it said.