KUALA LUMPUR (Aug 21): BIMB Securities Research has downgraded its call on Apex Healthcare Bhd (KL:AHEALTH) from ‘hold’ to ‘sell’, after the healthcare products manufacturer posted lower-than-expected earnings in the first half of FY2025, weighed down by associate losses.
"Due to recent rally in share price, we downgrade our call from a 'hold' to a 'sell' call with lower target price (TP) of RM1.91 (RM2.14 previously) following our earnings downgrade," said the research house in a note on Thursday.
Its valuation is based on a price-to-earnings ratio (PER) of 15.4 times, representing a three-year historical average PER to FY2027 earnings per share of 12.4 sen.
BIMB Securities also said that it expects earnings growth to remain subdued despite steady demand and the continued rollout of new products, as underwhelming returns from its associate continue to offset gains from the group’s core operations.
Following subdued earnings, the research house has cut its TP to RM1.91 from RM2.14 after lowering earnings forecasts for FY2025-FY2027, factoring in lower margin assumption.
“Additionally, while the pharmaceutical business has minimal direct exposure to the US, recent trade policy changes could indirectly impact performance via SAG’s orthopaedic exports to the US,” the research house cautioned in the same note.
The research house noted that Apex Healthcare’s net profit for the first half ended June 30, 2025 stood at RM36.9 million, falling short of consensus expectations and making up only about 40% of full-year forecasts.
On a quarter-on-quarter basis, Apex Healthcare’s revenue came in flat (+0.8%) in the second quarter of FY2025 (2QFY2025), but profit before tax rose 8.3% due to an improved sales mix, BIMB Securities added.
On Wednesday, it was reported that the group’s bottom line was dragged by its associate, Straits Apex Group Sdn Bhd (SAG) — an orthopaedic device manufacturer — which posted a RM2.6 million loss in 2QFY2025, in contrast to a RM1 million profit contribution in 2QFY2024.
Following associate losses, Apex Healthcare recorded a 15.4% year-on-year decline in profit before tax, despite a marginal 0.8% rise in revenue, BIMB Securities highlighted.
The group declared an interim dividend of three sen per share and a special dividend of three sen, amounting to 55.6% of BIMB Securities’ FY2025 dividend forecast of 10.8 sen.
At the time of writing on Thursday, Apex Healthcare was traded at RM2.48, down five sen or 2% from Wednesday’s closing price of RM2.53.