Strategic expansion into underserved markets and segments, alongside favourable industry trends, fueled UOB KayHian’s to note the projected three-year earnings growth at an impressive three-year CAGR of 19.0% (FY23-36F). The investment bank noted that the margins surpass those of its peers, showcasing Alpha IVF’s leading capabilities and execution. UOB KayHian initiates coverage with a BUY call and target price of RM0.40.
Alpha IVF’s obstetrician and gynaecology specialists, overseeing facilities in Alpha KL, Genesis Fertility Center (Genesis) in Penang and Singapore, collectively possess 126 years of experience. Since 2011, they have had zero attritio28n due to competitive remuneration and shared interests. This stability enables Alpha IVF to consistently surpass industry benchmarks in assisted reproductive services (ARS). The enduring commitment and expertise of its medical team, coupled with adherence to best practices in the labs, underscore Alpha IVF’s excellence and capabilities in reproductive medicine. Favourable structural trends. Malaysia’s medical tourism sector is poised for steady growth, with a projected 4.2% CAGR from 2018 to 2025, reaching RM2.0b in revenue by 2025. Alpha IVF, a member of the Malaysian Healthcare Travel Council since 2017, stands to benefit, with over 60% of its revenue coming from foreign patients. Declining fertility rates in Malaysia, Singapore and Indonesia are driving increased demand for ARS, supported by government incentives like Employee Provident Fund withdrawals and tax relief in Malaysia, and co-funding schemes in Singapore.
The success has been replicated successfully in the past, notably with Alpha Singapore. With Alhaya KL set to launch operations in 2Q24 and two additional specialist centres planned for Malaysia by 2026, expansion is set to extend to Indonesia and Laos/Cambodia. Its facilities are deemed ambulatory care centres that offer favourable economics to hospitals, with more achievable breakeven points, suggesting lower risks.
UOB KayHian noted that the regional IVF peers are trading at an average of 22.8x 2025F PE, but it opines that Alpha IVF deserves a 20% premium to its peers because it has a superior three-year earnings CAGR (FY23-26F) outlook of 19.0%, ahead of its peers’ average of 13.4% at its core, Alpha IVF does not only offer attractive growth and palatable valuations but also has leading clinical success rates in the region; and c) its far superior profit margins of 32.0% for FY24-26 are more than double the average of its regional peers (15.3%) and well ahead of the next highest margin (23.7%).
