YSP SOUTHEAST ASIA HOLDINGS BHD

By Affin Hwang Cpital Buy (maintain) Target price: RM3.24

AFFIN Hwang Capital is maintaining its ‘ buy’ call on YSP Southeast Asia, despite the strong share price performance since its initiation.

“Our major investment thesis that YSP’s growth continues to be driven by the overseas market remains intact as YSP’s growth in South-East Asia is robust and it has started to expand its sales to more countries outside of the region.”

The research house pointed out that the company’s first quarter 2017 revenue grew by 1.9% year-on-year compared with its 2017 estimated revenue growth of 9% year-onyear.

“We view this largely in line with our estimates as first quarter sales grew by 12% yearon-year, which created a higher base.

“Going into the second and third quarter of 2017, we expect YSP to record higher year-onyear growth compared with the first quarter, underpinned by overseas sales.”

According to checks with the management, Affin Hwang Capital said the company’s first quarter 2017 revenue growth was mostly contributed by overseas sales, which the research house thinks implies that local sales have yet to show meaningful recovery.

“Nevertheless, we still believe that private healthcare consumption may recover in 2017 after two years of slowdown. Hence, we maintain our assumption of 4% year-on-year growth in its local sales segment in 2017.”

Affin Hwang Capital pointed out that YSP has a market presence mainly within SouthEast Asia.

“However, we were pleasantly surprised that revenue from other countries doubled from RM5.1mil in 2015 to RM10.6mil in 2016. The management stated that the growth was mainly contributed from Africa, Middle East, Sri Lanka, Pacific Island, Hong Kong, among others.

“As YSP has managed to penetrate into more countries outside of the South-East Asia region, we are fairly confident with our forecast that YSP can maintain its overseas sales above 20% per annum for the next three years.”