Summary
Optimax reported 3QFY24 core net profit of RM3.2m (-15.9% qoq, +11.7% yoy). 9MFY24 core net profit of RM10.0m (+2.5% yoy), which came below both ours and consensus expectations, accounting for 67.8%%/68.0% of full year forecasts respectively.
We revised our FY24F depreciation rate from 12.5% to 13% and our tax rate from 25% to 28% (YTD tax rate was 26.6%). This resulted in FY24F CNP of RM13.7m. We have also revised our FY25F forecast lower by 7%, from RM18.7m to RM17.3m, as we increased our operating expense forecasts by additional 2% on the account of pre-operation training expenses for hospital operation commencement.
Our current FY25F and FY26F forecasts exclude hospital contributions, as Optimax is still in the MOU stage for potential partnerships.
Maintain BUY recommendation on OPTIMAX, with a lower target price of RM0.70 based on 22.0x pegged to FY25F EPS of 3.2 sen.
Results Review
Below expectations. Optimax's 9MFY24 core net profit (CNP) of RM10.0m accounted for 67.8% of our CNP forecast of RM14.7m and 68.0% of the street forecast of FY24F CNP at RM14.6m. Despite missing our and the consensus's expectations this quarter, the top line still aligned with our and consensus forecast, accounting for 70.9% of our revenue forecast of RM131.6m and 74.0% of the consensus of RM126.0m. Margins compression were noticeable on higher OPEX (higher staff cost in advance) and depreciation rates were recognised this quarter, as most of the new ACCs (Kota Kinabalu) and satellite clinics received operating licenses during this period.
Proposed dividend. An interim dividend of 0.8 sen per share, payable on 30 Dec 2024 was declared.
QoQ. 3QFY24 CNP declined -15.9% qoq to RM3.2m (from RM3.8m), despite a 3.3% qoq increase in revenue to RM33.1m — the weaker CNP was due to higher OPEX and depreciation expenses. Geographically, Central Malaysia saw a +4.4% qoq increase. While Cambodia surged +137.0% qoq improvement (due to a lower base effect). Central region's major contribution is mainly linked to the Atria clinics with some minor contribution from the aesthetic service. (Atria has 4 Operation Theatres (OT) and an aesthetic clinic—Neumax clinic)
YoY. 9MFY24 CNP rose 2.5% yoy to RM10.0m; the marginal increase was due to the effective promotional efforts from ongoing promotion and newly set up satellite clinics. On the other side, the top-line rose +13.1% yoy. Bottom line margin compression due to (i) higher OPEX, mainly additional hiring costs in anticipation for FY25 ACCs commencement, (ii) higher depreciation rate on new ACCs with associated rental costs and (iii) pre-operation costs at the Cambodia ACCs.
Outlook. Signed an MOU to operate full-service eye specialist centre in Selgate Group of hospitals. This hospital group will be one of the large-scale private healthcare operators in the country by end-2026, as it plans to complete and operate seven hospitals. While, Optimax currently has signed the MOU of the first hospital of Selgate Group in Setia Alam, we gather that construction is expected to be completed in 4Q24 and operational in early 2025.
Kempas Eye Hospital serves to capture the increased demand for Indonesia and Singapore medical tourism. Optimax may capitalise from its ability to price ReLEx SMILE service cheaper (refer to Appendix 1). The Group is also able to provide ReLEx SMILE pro and PRESBYOND laser treatment.
Earnings revision. We revised our depreciation and tax rates in FY24F to 13.0% from 12.5% and 25% to 28%, respectively. Most of the new ACC experienced higher depreciation expenses with associated rentals, and the YTD tax rate was recorded at 26.6%. This result in FY24F CNP at RM13.7m. We have also revised our FY25F forecast lower from RM18.7m to RM17.3m (-7%) following the additional 2% in operating expenses (from 48% to 50% of total revenue), due to the pre-operation training costs for hospital staff. The current FY25F and FY26F CNP has yet to factor in hospital revenue, as Optimax is still in the MOU stage with both hospitals.
Valuation. Maintain BUY recommendation with a lower TP of RM0.70 (from RM0.76). This is based on a PE multiple of 22.0x (2-year historical average) pegged to FY25F EPS of 3.2 sen, almost equivalent to Optimax's 2-year average historical PE of 22.6x. We are confident on Optimax's prospects, premised to the Group’s market leading position in cataract and refractive surgeries, advanced medical technology and aggressive expansion plans.
Risks. (i) Exposed to foreign exchange risk with potential short-term increases in material costs and freight charges, (ii) Changes in hospital agreements.
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| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.436869 | 4.470612 |
| EUR | 4.675505 | 4.679374 |
| CNY | 0.611103 | 0.611560 |
| HKD | 0.570272 | 0.574102 |
| SGD | 3.296965 | 3.319254 |