Stock with Momentum: Apex Equity Holdings

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Apex Equity Holdings Bhd

OUR momentum algorithm picked up Apex for the second time in less than a week, signifying increasing investors’ interest in the small stockbroking house, despite poor market conditions. Incidentally, Apex’ shares have bucked the market slump, rising by 3.3% since the system first picked it up on 8 October 2014 while the FBM KLCI has fallen 1.5%.

A strategic repositioning of Apex may be on the cards. Even if Apex remains a standalone stockbroker, the company has been building up its cash reserves, which can fund a strategic move into property development. The company has landbank in fringe areas of the Klang Valley, which are appreciating as development spread out beyond the suburbs.

Despite healthy dividends, Apex has been building up its cash reserves over the years, and had net cash of RM88.1 million or 43 sen per share as end-June 2014, up from RM36.2 million in FY2012.

As outlined in our earlier article (The Edge Financial Daily, October 10, 2014), Apex has 100.1 acres (40.5ha) of land in Sepang and 99 acres in Hulu Selangor carried at RM2.91 psf and RM2.31 psf, respectively. These lands, acquired in 1995 and 1996, have yet to be revalued and would have increased several folds. It also has 5.9 acres in Klang, purchased in 2003 at RM118.47 psf. In recent years, many developers have bought land for township development in the outskirts of the Klang Valley. With improved accessibility from public transport systems and highways, land values in these formerly peripheral areas have risen substantially.

Should Apex choose to start developing its land, it will not be the first stockbroker to take this path. TA Enterprise, initially a standalone stockbroking company, had successfully taken this route back in 1991 and is today driving more profits from its property arm, TA Global, than stockbroking.

This article first appeared in The Edge Financial Daily, on October 14, 2014.