Affin Hwang initiates Apex Healthcare with a ‘buy’

KUALA LUMPUR: Affin Hwang InvestmentBankBhd(AffinHwang Capital) has initiated coverage on pharmaceutical company Apex Healthcare Bhd (Apex) with a ‘buy’ rating, citing that they like the company for its solid earnings delivery and strong balance sheet.

In an initiating coverage report, AffinHwang Capital justified its decision by pointing out that Apex’s earnings have seen unfaltering improvement since their initial public offering in 2000.

“Since listing in 2000, Apex’s revenue and core net profit have grown at 10 and 9 per cent compounded annual growth rates (CAGRs), reaching RM580 and RM33.7 million respectively in 2016,” it said.

Based on this historical high CAGR, the research firm forecast the group’s 2016 to 2020 period to show similar results at a top-line CAGR of 11 per cent.

In addition, it also guided that the group boasted a strong balance sheet with net cash of RM79 million or net cash of RRM0.68 sen per share.

AffinHwang Capital added that its favourable outlook for Apex is also based on the group’s growth catalysts in its manufacturing division.

Torecap,Apexhadannouncedon September 6, 2017 that it had been awarded an EU GMP certification which is a mandatory certification that pharmaceutical companies need in order to penetrate into the European Union (EU) and other developed markets.

Coupled with the group’s new oral solid-dosage plant (SSPP NOVO) which is expected to double overall production capacity by the first half of 2018 (1H18), AffinHwang Capital expected the group to foray into the European pharmaceutical market in the near future.

The foray and boost in production capacity are expected to lift the group’s earnings to new heights and contribute to a forecast growth of 15 per cent CAGR in the group’s manufacturing division revenue over the 2016 to 2020 period.

Beyond that, AffinHwang Capital expected the group to continue its shift of focus to its in-house products which currently constitute 26 per cent of the group’s 2016 revenue.

“As the contribution from inhouse products rises, we believe this should help improve the group’s profit margin.