ALPHA: Earnings Outperform on Robust Revenue Growth, Target Price Raised
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
The company reported a first-quarter FY26 net profit of RM15.3 million, which aligns with both TA Securities’ full-year forecast (22.4%) and consensus estimates (22.1%). This represents a 6.3% year-on-year increase in net profit, driven by a significant 21.2% surge in revenue to RM52.1 million.
Performance Review
The robust financial performance was primarily attributed to strong growth across all three IVF specialist centres in Malaysia and a notable increase in foreign patients. This rise in medical tourism revenue was further bolstered by the company’s two satellite clinics in Indonesia and two sales offices in China, facilitating broader patient reach.
Despite the overall positive trend, the Singapore operations experienced a significant challenge, with sales declining 48.5% year-on-year to RM3.9 million. This downturn was largely due to the departure of a key doctor in October 2024. Additionally, the effective tax rate saw an increase of 5.4 percentage points to 26.7%, a result of temporary differences stemming from unused tax losses in certain subsidiaries that have yet to commence operations.
On a quarter-on-quarter basis, profit before tax (PBT) saw a marginal decrease of 1.8% to RM21.0 million, even with a 4.2% increase in revenue. This was attributed to higher start-up costs associated with ongoing expansion initiatives, including the recruitment of additional staff and doctor training expenses at existing centres.
Future Outlook and Expansion
TA Securities fine-tuned its FY26-28 earnings projections upwards by 0.6% to 1.7% after incorporating FY25 audited accounts. The company is strategically positioned to capitalize on structural growth in assisted reproductive services, supported by global trends such as declining sperm counts, increasing international patient inflows, and a demographic shift towards later family planning.
The investment bank remains optimistic about the company’s planned expansion into Sabah (November 2025) and Johor (4QFY26), which will significantly extend its reach into high-demand urban centres. Regional developments in the Philippines and Bali are also progressing as planned, further solidifying the company’s ambition to establish itself as a leading fertility clinic network in Asia, underpinned by its strong brand and proven success rates. The share price has already seen a 16% increase since TA Securities initiated coverage on August 14, 2025, with the company’s aggressive local and regional expansion strategy expected to drive future earnings growth and provide further upside potential.
Investment Recommendation
TA Securities maintains a “BUY” recommendation for the stock, with a revised target price of RM0.42 per share (previously RM0.36), reflecting a 26.8% upside from the last traded price of RM0.335. This revised target price is based on an unchanged price-to-earnings (PE) multiple of 23.0x, with the valuation base year rolled forward to CY27.
