Optimax Holdings Berhad - Higher operational cost bites into margins
Thu, 29-Aug-2024 07:23 am
by Chelsea Chew • Apex Research

Counter

OPTIMAX (0222)

Target Price (RM)

0.76

Recommendation

Buy

Summary

OPTIMAX 2QFY24 core net profit of RM3.8m (-1.4% yoy and +25% qoq), bringing 1HFY24 core net profit at RM6.8m (-1.3% yoy) came below ours and consensus expectations, constituting 36% and 46% of forecast respectively, impacted by higher depreciation and staff costs.

Tweaked our FY24F earnings forecast from RM19.1m to RM14.6m on increasing operating expenses and set the FY25F core net profit forecast at RM18.7m (up from RM17.7m) based on better growth prospects.

Upgrade our recommendation to BUY, with a higher target price of RM0.76, pegged by P/E multiple of 22x for FY25F EPS of 3.4 sen.

 

Results Review

  • Results review. 2QFY24 reported revenue increased +14.9% yoy and +13.6% qoq, reaching RM32.0m. This stellar performance is mainly driven by higher sales volume resulting from the group’s successful marketing efforts. While, core net profit experienced a slight decline of -1.4% yoy but improved by +25% qoq, standing at RM3.8m. Core net profit weakness was not aligned proportionally with higher revenue due to higher operational cost and depreciation during the quarter. 

  • Below expectations. 1HFY24 core net profit of RM6.8m came below expectations, constituting 36% of our forecast and 46% of consensus expectations. Key deviation is mainly due to higher-than-expected operational and depreciation charges.

  • Operations Highlights. During the quarter, decline in the bottom line was affected by additional staff hired for new ACCs and satellite clinics, increased depreciation related to rental costs from the new satellite clinic, and pre-operation costs incurred for Cambodia ACC. We expect the margins to normalise once the new centres/clinics commence operations in 2H24.

  • In May 2024, the Group’s Cambodia branch and its aesthetic clinic, Neumax, began operations and are expected to boost revenue from June. Meanwhile in July, Optimax's subsidiary signed an MOU with Malaysia's Ministry of Health to provide eye exams and spectacles to Putrajaya primary school students, aiming to improve the children’s vision and overall well-being.

  • Industry Highlights. A study at UM Medical Centre found that 32.6% of 1,002 patients had visual impairments, with 0.9% blind. These results highlight the need for general practitioners to address avoidable visual impairments. The robust healthcare outlook, driven by rising health awareness and demand, well positioned Optimax to benefit from expansionary of its network of ambulatory care centers and satellite clinics across Malaysia.

  • Outlook. New ACCs in Atria Mall, Petaling Jaya, and Kota Kinabalu are set to open in September 2024. Optimax is also introducing PRESBYOND technology for presbyopia and expanding pediatric eye care services. The move aim to enhance treatment options and attract more patients. Also, increased health awareness is expected to boost Optimax's sales performance.

  • Valuation. We trimmed our FY24F earnings forecast, reducing the GP margin from 78.1% to 77.0% and increased operating expenses by c.3%, resulting in a core net profit of RM14.6m (previously at RM19.1m). For FY25F, we expect the GP margin to improve at 79.5% (from 78.1%) underpinned by commencement of Kempas Eye Hospital, Setia Alam Hospital and new ACCs/clinics, thereby boosting the core net profit to RM18.7m. As a result, we upgrade our recommendation for OPTIMAX to BUY (from HOLD) with a higher target price to RM0.76, based on P/E multiple of 22x for the FY25F EPS of 3.4 sen. 

  • Risk. Exposed to foreign exchange risk with potential short-term increases in material costs and freight charges.

Read more details in:

Disclaimer

The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written consent of Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report.

Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.

Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against Apex Securities Berhad. Apex Securities Berhad may from time to time have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior written approval of Apex Securities Berhad.

Market Mover
Settlement Rates
Currency Buy Rates (RM) Sell Rates (RM)
USD 4.283853 4.317705
EUR 4.765844 4.774924
CNY 0.605865 0.606556
HKD 0.549396 0.553768
SGD 3.299365 3.325824