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Apex Equity Holdings Bhd

APEX Equity Holdings Bhd is primarily a Kajang-based stockbroking company, with asset management and property investment arms. The company is shaping out as an attractive potential merger and acquisition candidate, and an undervalued asset play.

Apex has high net profit margins averaging 40.5% from 2010 to 2013. This was partly due to high interest income averaging RM11.7 million per year during the same period, a reflection of its strong balance sheet.

In 2013, revenue surged 35.1% to RM64 million while pre-tax profit increased 4.7% to RM31.2 million. For 1H2014, revenue grew 22.9% to RM38.4 million, while pre-tax profit rose 48.6% to RM19.4 million.

The stock is trading at a trailing 12-month P/E ratio of 9.9 times and a price-to-book ratio of just 1.04 times. Dividend per share was 8 sen in 2013, translating into a decent yield of 5.3%.

There has been a number of mergers and acquisitions among investment banks in recent years, and Apex appears attractively priced on a price-to-book basis, although it is a standalone stockbroker.

To recap, RHB Capital had acquired OSK Investment Bank at 1.77 times book in 2012 while this year, Affin Holdings paid 1.3 times book for HwangDBS’s investment banking business. Since 2000, the average acquisition price for investment banks has been 1.3 times book.

It should also be noted that Apex’ assets are understated as it holds large tracts of land bought at low prices. The company has 100.1 acres (40.5ha) of land in Sepang with a book cost of RM12.7 million, or RM2.91 psf, and 99 acres in Hulu Selangor carried at RM10 million, or RM2.31 psf. Both were acquired in 1995 and 1996, and have not been revalued since. It also has 5.9 acres of land in Klang acquired in 2003 with a book cost of RM30.5 million or RM118.47 psf.
 

This article first appeared in The Edge Financial Daily, on October 10, 2014.

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