HONG Leong Investment Bank Bhd (HLIB) has cut its earnings forecasts for Adventa Bhd by two to eight per cent to reflect higher expenses and less favourable market outlook.
Adventa’s projected revenue and earnings growth rates are highly reliant on the successful implementation and execution of its new home renal dialysis operations, HLIB said.
The company saw its net profit decline to RM4.3 million in the financial year ended October 31 2014, from RM82.4 million a year ago, on the back of a higher revenue of RM34.8 million against RM27.4 million for the same period.
This was mainly due to higher expenditure arising from the home dialysis business in which trials are still ongoing and are expected to be completed by the first quarter of next year.
HLIB said the company’s fourth quarter turnover improved by a whopping 106 per cent year-on-year (yoy) and 16 per cent quarter-on-quarter (qoq). On the contrary, its earnings registered double-digit declines (-10.2 yoy and -14.3 qoq) due to higher expenditure arising from the Home Dialysis business.
HLIB has reiterated its “buy” call on Adventa with a revised target price of RM1.20 from RM1.30 previously, based on financial years 2010/2015 price-earnings of 19 times, which is at a 26 per cent discount to Asian healthcare players.