KUALA LUMPUR (Sept 30): Hong Leong IB Research has maintained its “Hold” rating on Adventa Bhd with a higher target price of 77 sen and said Adventa’s PATAMI of RM500,000 for its 9MFY16 accounted for 14% of house forecasts.

In a note today, the research house said the deviations were due to lower than expected revenue contribution from its distribution segment and high marketing and promotional expenses for its Home Dialysis business.

It said the sterilisation segment remains stable. Sales grew 10% y-o-y (q-o-q: 12%) and EBIT increased 14% y-o-y (q-o-q: 38%).

HLIB Research said budget cuts in public healthcare sector continue to impact Adventa’s distribution segment.

It said sales decreased by 29% y-o-y (q-o-q: -31%), adding that EBIT entered the red q-o-q but remains positive y-o-y.  

“Home Dialysis business is still in its infancy, EBIT in the red as promotional and marketing costs outweigh patient uptake.

“FY16/17 earnings forecast reduced by 50%/13 as we expect performance from its distribution segment to remain slow, whilst patient uptake for their home dialysis business remains laggard.

“TP is increased to 77 sen as we roll our forecast to CY17 pegged to 10X PE multiple, which is a discount of 75% to Asian healthcare players due to its lower market cap, low liquidity and infancy of a unique business. Maintain Hold,” it said.