"Apex Equity's money lending segment to prop up 2H2023 earnings"

KUALA LUMPUR: Apex Quity Holdings Bhd is expected to post a 10 per cent increase in earnings growth in financial year (FY) 2023, with its money lending segment delivering higher earnings in the second half of FY2023.

Public Investment Bank (PublicInvest) research believes Apex Equity Holdings Bhd's money lending segment will deliver higher earnings in 2HFY23 due to rising cost of funds, which would lead to higher effective lending rates.

"Given a lackluster stock and securities trading business, we believe the money lending segment would continue to generate earnings for the group to partly offset the impact of slower growth in brokerage income. "

"As such, we expect a flattish 2HFY23 earnings, mainly supported by profit from the money lending segment.

"Our earnings forecasts remain unchanged. We reiterate our neutral rating on Apex Equity with an unchanged target price of RM1.20," it said in a note today.

"Although contribution (from the money lending business) remained low at only 16 per cent of group's revenue, profit margin was high at over 50 per cent owing to a relatively high effective interest rate," said the research firm.

The money lending business has helped to partly mitigate the impact of slower growth in brokerage income following the sharp decline in trading activities since early 2021.

As at September 30, 2023, the aggregate amount of outstanding loans or advances amounted to RM68.8 million, of which 78 per cent was extended to corporates with the remaining 22 per cent to individuals.

Apex Securities' money lending operations temporarily ceased in 2QFY21 but since 3QFY22, this segment has been contributing positively to the group, generating decent profit of RM1-2 million a quarter.

PublicInvest said given the slow recovery in trading activities on Bursa Malaysia, Apex has delivered satisfactory results for 1HFY23 with quarterly profit sustaining at RM2 million.

Stock and securities broking segment posted higher revenue and pretax profit contribution, at about RM9 million and RM2 million a quarter after falling to a low of RM7.2m and RM1 million respectively in 3QFY22.

For 9MFY23, stock trading value on Bursa Malaysia has declined by 5 per cent YoY while volume has increased by 14 per cent YoY.

"Hence, we are not expecting its stock and securities broking segment to outperform in the coming quarters, perhaps posting lower earnings compared to 1HFY23. --ends-

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