Summary

• Optimax Holdings Bhd’s (Optimax) 2QFY21 net profit jumped 683.1% YoY and 58.6% QoQ to RM2.0m, bringing a significant 126.0% surge in 1H21 net profit as compared to 1H20. The results, however, came in below expectations, amounting to 33.7% of our previous full year consensus of RM9.8m. Key deviation was due to higher than expected number of surgeries done under easing of lockdown period.

• The increase in 1H21 net income was due to higher contribution from all geographical segments in Peninsular Malaysia, saved for East Malaysia during the period of easing restrictions under MCO3.0 as compared to MCO1.0 as well as the ongoing marketing efforts through online platforms. Meanwhile, new revenue stream was derived from national vaccination programme (PICK) and MyMedic@Wilayah.

• YoY, Optimax which is able to operate under both the MCO3.0 (imposed in May 2021) and FMCO (imposed in June 2021) period delivered solid profit growth. In comparison, 2Q20 earnings were lower due to the imposition of stricter MCO1.0, a portion of accrued cost and the donation made to Ministry of Health Malaysia to combat the Covid-19 outbreak.

• QoQ, the increase in profit was contributed from higher revenue generated during the quarter, while earnings in the preceding quarter was affected by fewer business days in February, where people tend to defer their surgeries during festive season.

• To date, Optimax has 15 eye surgeons and 3 locum doctors, supported by a team of optometrists. Despite expansion plan being disrupted by ongoing restrictions measures, the management is awaiting interstate travel restrictions to be uplifted to expand its ambulatory care centre (ACC) network towards East Coast Peninsular and East Malaysia, targeting additional 2-3 ACC. Meanwhile, Optimax remained committed to its plan to hire additional surgeons in Seremban ACC and to set up 2-3 satellite clinics.

• Moving forward, we expect the new relaxation of SOPs under the National Recovery Plan is likely to bring recovery to Optimax and anticipate a gradual recovery in number of patients. Moreover, the increasing vaccination rates in Malaysia could help curbing Covid-19 outbreak, eventually increasing traffic footfalls.

Valuation & Recommendation

• With the reported earnings coming below our expectations, we slashed our earnings forecast by 25.5% and 14.7% to RM7.3m and RM11.0m respectively for FY21f and FY22f to account for deferred expansion plan amid Covid-19 restrictions. Nevertheless, we upgrade our recommendation to BUY (from Hold) on Optimax with a revised target price of RM1.63 as we are rolling forward to the FY22f earnings. The target price is arrived by ascribing a target PER of 40.0x to its FY22f EPS of 4.1 sen.

• Outlook wise, we anticipate an improvement on both top and bottom line for Optimax underpinned by the gradual recovery in number of patients and surgeries conducted following the increasing vaccination rates in Malaysia. Besides, we look forward to seeing growth derived from higher contribution from Seremban ACC, additional 2-3 ACC expansion and more satellite clinics.

• Risks to our recommendation include the high Covid-19 daily infections in the country amid Delta variant which may result in surgeries postponement and eventually reduce its margin.

Source: Mplus Research - 26 Aug 2021