Apex Equity Holdings (Apex Equity) reported an 88% decline in 3QFY22 net profit to RM1m, mainly due to lower brokerage income and securities transactions. Excluding non-operating items which include a gain on disposal of an associate company, core net profit for 9MFY22 stood at RM4.1m. This only accounted for 61% of our full-year estimates, mainly due to lower-than-expected contribution from the stock and securities broking business. As such, we cut our FY22-24F earnings estimates by an average of 14% as we forecast a lower brokerage income due to lower securities transactions. Given uncertainties surrounding global economies amid the rising interest rate environment, we believe equity markets would remain sluggish in the medium term. We maintain our Neutral rating on Apex Equity with a revised TP of RM1.03 based on 0.65x FY23F PBR.

• 9MFY22 revenue and net profit fell 66.3% YoY and 76.9% YoY, respectively. The decline was mainly due to a drop in brokerage income and securities transactions. The stock and securities broking segment contributed to 93% of the group’s total revenue. The weaker performance was due to poor investor sentiment on Bursa Malaysia with the FBM KLCI falling by 11% year to-date. Also, the group recognised a gain on disposal of land amounting to RM4.4m in 9MFY21.

• 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 volume and value on Bursa Malaysia has declined by 56% and 46% respectively. As we expect Malaysia’s sentiment to be adversely affected by external market conditions as well as inflationary pressures on rising interest rates, we forecast Apex Equity’s FY22F earnings to fall by 62% YoY.

Source: PublicInvest Research - 1 Dec 2022