Apex Equity Holdings Bhd
APEX was picked up by our momentum algorithm for the third time this month, after a sudden spike in volume over the last two days. However, investors should take note that the stock is fairly illiquid and had negligible volume for two days last week, before the increase in trading interest.

The stock price has risen by 4.0% to RM1.55 since the system first picked it up on October 9, 2014, while the FBM KLCI has increased by a mere 0.5% in the same time frame.

Apex is primarily a Kajang-based stockbroking company, with asset management, money lending and property investment arms. The company is shaping out as an attractive potential merger and acquisition candidate given the evolving financial services landscape and recent mergers of investment banks, as well as an undervalued asset play.  

The company’s assets are understated as it holds large tracks of land acquired at low prices. It has 100.1 acres 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 2013, revenue surged 35.1% to RM64.0 million while pre-tax profit increased 4.7% to RM31.2 million. For 1H2014, revenue grew 22.9% y-o-y to RM38.4 million, while pre-tax profit rose 48.6% y-o-y to RM19.4 million. Net cash stood at RM88.1 million or 43 sen per share as at end-June 2014, up from RM36.2 million in 2012.

The stock is trading at a trailing 12-month P/E ratio of 10.1 times and a price-to-book of 1.06 times. Dividend per share was 8 sen in 2013, translating into a decent yield of 5.2%.

This article first appeared in The Edge Financial Daily, on October 31, 2014.