Apex Equity Holdings’ (Apex Equity) 3QFY23 net profit more than doubled to RM2.23m on the back of higher stock and securities trading activities. For 9MFY23, net profit jumped 31.7% YoY due to higher brokerage and moneylending income. After adjusting for non-operating items, results were within our expectations at 71% of our full-year estimates. Our FY23-25F earnings forecasts remain unchanged. We believe the money lending segment would continue to generate earnings to the group to supplement the volatile stock and securities broking income. We reiterate our Neutral rating on Apex Equity with an unchanged TP of RM1.20, based on 0.7x PBR.

• 9MFY23 revenue and net profit jumped 23.0% and 31.7% respectively. Stock and securities broking segment posted an 11% YoY increase in revenue mainly due to better brokerage performance while moneylending segment saw its revenue more than triple due to the resumption of operations in 3QFY22. Overall investor participation has improved while the average daily trading value was down by 4%. As a result, stock and securities broking pretax profit rose 37.2% while moneylending profit increased from RM2.11m in 9MFY22 to RM2.63m in the current quarter.

• Outlook. As Apex Equity derives the bulk of its income from the stockbroking business, its growth prospects will be dependent on the vibrancy of our domestic capital market. Year to-date, total trading value on Bursa Malaysia has declined by 20% YoY while volume was flat. However, we note that Apex Equity has resumed its money lending business last year. The operations of money lending were temporarily ceased in 2QFY21 but since 3QFY22, this segment has been contributing positively to the group, generating decent profit of RM1-2m a quarter. We believe the money lending segment would continue to generate stable income and supplement the volatile stock and securities broking operations.

Source: PublicInvest Research - 29 Nov 2023