Apex Equity Holdings (Apex Equity) reported a 29.5% increase in 2QFY23 net profit to RM1.6m, driven by higher contribution from stock and securities broking business. Loan interest income from the moneylending operations was also higher in 2QFY23. Cumulative 1HFY23 results came in above our expectations, accounting for 57% of our full-year net profit forecast. This was mainly due to higher than-expected contribution from moneylending operations. We raise our FY23-25F earnings forecasts by an average of 16%, factoring in higher profit contribution from moneylending activities. Consequently, we raise our TP to RM1.20, based on an unchanged multiple of 0.7x PBR. We reiterate our Neutral rating on Apex Equity.

• 2QFY23 revenue rose 35% YoY while net profit jumped 29.5% YoY, despite a weaker market condition where the average daily trading value traded on Bursa Malaysia fell 16% to RM1.78bn, compared to RM2.13bn in 2QFY22. The increase in revenue was mainly due to higher loan interest income from the moneylending operations, following the reactivation of the business in 2HFY22. Stock and securities broking activities have also increased, higher by 12.8% YoY to RM8.7m. This was on the back of the increase in margin interest income, though partly offset by a marginal drop in brokerage income. As a result, 2QFY23 net profit increased 29.5% to RM1.6m.

• Outlook. Year to-date, total trading value on Bursa Malaysia has declined by about 12% YoY while volume increased by 7% YoY. The market is struggling to break out of its range-bound trading band, despite being supported by encouraging economic fundamentals. From the long-term standpoint, we should have seen the worst in 2022 with the market now looking attractive trading below the average of 16x forward PER. This should lead to greater participation in the market, once sentiment improves. At this juncture, we maintain our Neutral rating on Apex.

Source: PublicInvest Research - 30 Aug 2023