AHEALTH: Profitability Dips Amid Margin Squeeze, Cautious Outlook Prevails
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A recent investment bank research report highlights a challenging quarter for Apex Healthcare Berhad (ApexH), which recorded a 14.4% year-on-year decline in net profit to RM15.6 million for 3QFY25. Excluding non-operating items, core net profit similarly decreased by 11.6% YoY to RM16.2 million. These figures fell largely within analysts’ expectations for the quarter, although they were slightly below full-year forecasts.
Performance Review
Despite the dip in profitability, ApexH’s revenue for 3QFY25 increased by 6.6% YoY to RM253 million. This growth was primarily fueled by steady demand for pharmaceuticals, consumer healthcare products, and medical devices, particularly within the private sector. Enhanced performance from distribution agencies also contributed positively. The distribution segment saw a 7.1% YoY revenue increase to RM232.4 million, while the manufacturing segment achieved a marginal 1.6% YoY improvement, reaching RM20.5 million.
Key Challenges and Headwinds
The decline in both net profit and core net profit was largely attributed to significant margin compression. This stemmed from a higher proportion of lower-margin distribution revenue within the sales mix. Additional pressures included increased depreciation charges associated with new facilities (Techlink and Cheng 2) and a higher share of losses from its associate, SAG. SAG reported a RM3.6 million loss in the quarter, impacted by slower order recovery and elevated operating expenses. Consequently, the pre-tax profit margin fell to 8.6% in 3QFY25 from 10% in 3QFY24.
Future Outlook and Strategic Initiatives
Looking ahead, the investment bank remains cautious regarding ApexH’s near-term outlook, citing prevailing macroeconomic headwinds and persistent margin pressure. Nevertheless, analysts express optimism for the company’s long-term resilience, underpinned by robust domestic demand, continued product pipeline expansion, and enhanced digital capabilities. Furthermore, strategic initiatives such as the proposed disposal of two investment properties in Singapore, anticipated to complete in 4Q25, are expected to optimize its long-term operational and capital efficiency.
Investment Recommendation
Given the mixed performance and outlook, Public Investment Bank has maintained a “Neutral” call on Apex Healthcare Berhad, with an unchanged target price of RM2.64.
