ADVENTA BHD

By Hong Leong Investment Bank Hold (maintained) Target price: RM0.65

ADVENTA Bhd’s profit after tax and minority interests (Patami) of RM0.4mil during the nine months of 2017 was below Hong Leong Investment Bank’s (HLIB) expectations, making up 21% of its FY17 forecasts.

This was mainly due to larger losses in the home dialysis segment amid slower than expected adoption.

“Adventa’s nine months 2017 revenue grew 9% y-o-y from RM29.4mil to RM32.1mil on the back of better contributions from the distribution business.

“However, Patami registered a decrease of 30% y-o-y from RM0.529mil to RM0.371mil due to higher operating costs and wider losses from the dialysis segment.

“Year-to-date revenue grew by 12% y-o-y, while earnings before interest and tax grew 21% y-o-y. We expect contributions from this segment to exhibit growth on the addition of new accounts and higher operational efficiency,” HLIB said.

On healthcare distribution segment, HLIB said the group continued to benefit from its shift from healthcare consumables to higher value products, while making headways in the private sector sales.

Meanwhile, losses widened in the quarter in the home dialysis segment to RM3.7mil y-o-y as operating costs outweighes patient uptake.

“Moving forward, we continue to expect higher investments in the segment on anticipation of a surfe in patient uptake in FY18, assuming Adventa acquires the appropriate regulatory approvals,” HLIB noted.

Success of the home renal dialysis business is dependent on a smooth transition of patients from hospitals and private treatment centres to home treatment post an elongated regulatory registration and clinical study period.

“We reduce our FY17 earnings per share by 69.6% to better reflect the

higher operating cost from the home dialysis segment amidst delays in the push for adoption at the domestic and international level for its home dialysis system,” the research firm added.