KUALA LUMPUR (May 16): Shares in Apex Healthcare Bhd (KL: AHEALTH) fell again on Thursday, and may be on track for their worst day in nearly a year, after the pharmaceutical company posted weaker-than-expected first-quarter results.
Apex Healthcare extended Wednesday's drop, and was down as much as 5.22% to RM2.91, its lowest since April 25. The stock closed at RM2.93 or 4.56% lower on Thursday – the biggest drop in a single day since March 2, 2021 – valuing the company at RM2.11 billion. It was also leading a broad decline among pharmaceutical stocks.
Analysts are wary of further upside to the share price and the company’s earnings prospects, with net profit for the three months ended March 31, 2024 (1QFY2024) of RM21.2 million only accounted for about 22% of the consensus full-year forecast.
Public Investment Bank, one of six research houses covering the stock, said it "remains cautious about the slowdown in demand for Covid-related products" by Apex Healthcare. The research house kept the stock on a ‘hold’ call.
Shares in Apex Healthcare have risen 26% so far this year, bucking the year-to-date decline of most of its peers in the pharmaceutical industry, thanks partly to a special dividend from gains from a stake sale.
Among the six analysts covering Apex Healthcare, two rated the counter as ‘sell’, two recommended ‘hold’, and the remaining two had ‘buy’ calls. The consensus 12-month target price stood at RM2.36, according to Bloomberg.
The stock currently trades at a “fully valued” 23 times forward earnings, a 27% premium to its five-year average of 18 times, said AmInvestment Bank, which maintained its ‘hold call on the stock. Further, Apex Healthcare offers a 'slight' dividend yield of only 1.6%, it noted.
On Wednesday, the group reported that its net profit for 1QYF2024 fell 13% to RM21.2 million from RM24.3 million a year earlier, mainly due to the absence of profit contributions from its 40%-owned associate Straits Apex Group Sdn Bhd (SAG).
SAG sold its entire interest in Straits Apex Sdn Bhd last year, reducing Apex Healthcare’s effective equity in Straits Apex to 16%.
For the remainder of FY2024, Apex Healthcare noted that earnings from SAG, which is engaged in contract manufacturing of orthopaedic devices, are not expected to contribute significantly to group earnings.
Despite the decline in 1QFY2024 net profit, quarterly revenue increased slightly by 1% to RM248.2 million from RM245.8 million, which came as market demand for pharmaceuticals, consumer healthcare products, and medical devices showed signs of slowing in the group’s key markets.
On its outlook, Apex Healthcare said it will remain focused on its core pharmaceutical business by investing in growth, including building a second liquid production plant and advanced warehousing in Kawasan Perindustrian Cheng, Melaka.