KUALA LUMPUR: Apex Equity Holdings Bhd is anticipated to grow its earnings at a compound annual growth rate of nine per cent over the course of three years.
It is expected that increased money lending activity and a more favorrable domestic economic environment will support this expansion, said PublicInvest Research.
According to the research firm, Apex Equity has had multiple changes in management and ownership in the recent past, especially after the departure of its major shareholder, the late Chan Guan Seng, in 2017.
A new management team has been put in place, and the group aims to improve corporate governance as well as generate higher returns through non-core asset disposal and business diversification, such as the expansion of money lending operations.
Apex Equity's cash reserves have fallen to RM47 million in the financial year 2023 (FY23) from RM104 million in FY22, mainly due to its planned expansion of the higher-yielding money lending business.
"For the same period, its receivables have grown from RM146 million to RM257 million. Although the pre-tax profit contribution from money lending remains small relative to its stockbroking business, at only RM5.6 million versus RM11.5 million in FY23, it has grown from a meagre RM2.3 million in FY22," said the firm.
Meanwhile, the group has recently entered into a Memorandum of Understanding with Yuanta Securities (Hong Kong) in relation to a collaboration on cross market initiatives on wealth management services, multi-market trading access, as well as research and marketing efforts.
In November 2023, the group announced the proposed disposal of Menara Apex in Kajang for RM55 million, locking in an estimated disposal gain of RM39 million. The group has other non-brokerage assets, such as landbanks in Sepang and Ulu Yam, measuring approximately 100 acres each.
"Although there is no further plan to unlock the value of non-core assets, we believe the group would not hesitate to do so when opportunity arises in the future," it added.
The firm maintained 'neutral' on the stock with an unchanged target price of RM1.20.