KUALA LUMPUR (Sept 29): Public Invest Research has trimmed its earnings forecasts for Apex Equity Holdings Bhd, which trades marketable securities, by 6%-10% for the financial year ending Dec 31, 2022 (FY22) to FY24 amid the rising interest rate environment due to inflationary pressures. 

As Apex Equity derives the bulk of its income from the stockbroking business, the research house expects a weaker performance in the second half of this year (2H22) due to a sharp decline in trading volume and value on Bursa Malaysia.

“With Bank Negara Malaysia raising its overnight policy rate for the third time in a row to 2.5% early this month while the ringgit has depreciated by 10% year-to-date, we believe the vibrancy of the domestic capital market will remain subdued in the near term,” Public Invest wrote in a note on Thursday (Sept 29). 

The research house noted that the group’s latest quarterly results for the second quarter ended June 30, 2022 (2QFY22) — which saw its net profit tumble 83.35% to RM986,000 from RM5.92 million a year earlier — were mostly dragged by a jump in effective tax rate to 38.8%. 

“Although we believe tax rate should normalise in 2HFY22, the anticipation of a further deterioration of market activities has prompted us to cut our FY22 earnings [forecast] by 10% and FY23-24 earnings [forecasts] by 6%. 

“Our TP [target price] is marginally reduced to RM1.05, which is based on 0.65 times [forecasted] FY23 price-to-book ratio,” said Public Invest, which kept its “neutral” rating for the stock. 

In view of the uncertainties surrounding global economies amid the rising interest rate environment, the research house believes equity markets would remain sluggish moving into 2023.

Apex Equity was traded at RM1.02 as at the time of writing on Thursday, for a market capitalisation of RM217.83 million.