Adventa Bhd
(June 24, RM1.01)
Maintain hold with a higher target price of RM1: Adventa’s revenue for the first half ended April of financial year 2015 (1HFY15) of RM22.4 million met our expectations (53% of our full-year forecasts), while its profit after tax and minority interests (Patami) of RM1.5 million was below our expectations, coming in at 21% of our FY15 estimation.

The deviations to expectations were due to higher expenses from the home dialysis business, higher import cost as a result of the weakening of the ringgit, and the maintenance of equipment for Adventa’s sterilisation provider division.

For its 1HFY15, Adventa posted a 72% increase in sales year-on-year (y-o-y). Profit before tax on the other hand was 2% lower y-o-y, mainly caused by higher costs incurred in purchases and maintenance (from the sterilisation provider segment).

Adventa’s healthcare products segment achieved a whopping 127% increase in revenue y-o-y to RM8.6 million from RM3.8 million in the second quarter (2Q) of FY14. The huge leap was due to higher sales volume coming from the introduction of new products. Apart from servicing public hospitals, Adventa plans to focus on the private segment. This should be positive for the group as the private sector generally provides higher margins. Overall, we expect its market share in supplying hospital supplies to improve.

Sales at the firm’s sterilisation provider segment increased 24% y-o-y, but declined 3% quarter-on-quarter. This is attributed to its major upkeep or maintenance of equipment, thus slowing down its operation in 2QFY15. We expect sales to pick up in 3Q onwards.

We are still positive on its home dialysis business, which we expect will be launched in 4QFY15. Hence, we believe contribution from home dialysis should kick in from 2016 onwards.

The successful roll-out of the new and projected high-growth home renal dialysis business (slated for 4QFY15) is dependent on a smooth transition of patients from hospitals and private treatment centres to home treatment. Trials are ongoing with further investments in patient care education and training as well as extending reach into rural regions. Our forecasts remain unchanged pending an update from management. — HLIB Research, June 24

This article first appeared in The Edge Financial Daily, on June 25, 2015.