Summary

• Optimax Holdings Bhd’s (Optimax) 1Q22 core net profit surged 101.5% YoY to RM2.6m, primarily driven by the increased number of patients amid easing restrictions under the National Recovery Plan. Although the net income came in at 20.1% of our full year forecast of RM12.7, we deemed it is in line as the upcoming ACC in Bahau, Negeri Sembilan will start to contribute by 2H22 and number of patients is expected to increase following as we enter the endemic phase.

• Core net profit jumped YoY, primarily resulted from (i) increase in number of patients for refractive surgeries and cataract surgeries who had postponed their treatments during various MCO implemented earlier (ii) effective marketing effort through online platforms, and (iii) better control of operating costs on the back of experience gained from multiple lockdowns since March 2020.

• QoQ, however, core net profit declined 27.5% to RM2.6m, mainly due to a lower revenue from the national vaccination programme (PICK) in the current quarter which is in line with our earlier expectation. Nevertheless, an increase in revenue from eye specialist services helped cushion the revenue losses from vaccination.

• Moving forward, we believe contribution from vaccination programme will remain minor as majority of the Malaysian population have been vaccinated. Optimax’s main business focus will be on ACC network expansion, setting up satellite clinics and business expansion to extend its market reach in the country. As Malaysia transitions into endemic phase, the group saw a gradual improvement in the performance of its branches, with some branches returned to pre-Covid-19 levels.

• Optimax’s new ACC in Bahau, Negeri Sembilan is being renovated and is expected to be completed by 2Q22. Upon completion, the group is expected to have one resident doctor for the branch. Meanwhile, its first satellite clinic in Taman Sutera located in Skudai, Johor is expected to be fully operational by 2Q22.

• We like Optimax’s strategic collaboration with Selgate Healthcare Sdn. Bhd. (Selgate) to operate a full-service eye-specialist centre at Selgate’s designated hospitals. The first intend collaboration hospital will be in Selgate Hospital Shah Alam branch, while potential future collaboration branches include Rawang, Kota Damansara, Shah Alam, Gombak and Kuala Selangor.

Valuation & Recommendation

• As the reported earnings came in largely within our expectations, we made no changes to our earnings forecast at RM12.7m and RM14.0m for FY22f and FY23f respectively. We believe the easing Covid-19 restrictions will continue to bode well for Optimax’s performance.

• We maintained our BUY recommendation on Optimax with a revised target price of RM0.94 (from RM1.88) after taking into consideration the recent bonus issue. Our target price is based on the assigned target PER of 40.0x to our revised FY22f EPS of 2.3 sen.

• Risks to our recommendation include the uncertainties associated with the Covid-19 pandemic. Any resurgence in Covid-19 cases may result in movement restrictions and the postponement of surgeries. Besides, shortages of skilled doctor in the new ACC could be another risk.

Source: Mplus Research - 26 May 2022