Summary

• Optimax Holdings Bhd’s (Optimax) 2Q22 core net profit surged 125.2% YoY to RM4.6m, bringing its 2H22 net profit to RM7.2m (+116% YoY). The results came in slightly above expectations, amounting to 56.7% of our full year forecast of RM12.7m and 53.7% of the consensus at RM13.4m. Key deviations include higher than-expected increase in number of surgeries conducted amid relaxation of restrictions under Malaysia’s National Recovery Plan (NRP) in combating Covid-19.

• Core net profit increased YoY, primarily attributed to (i) an increase in number of refractive and cataract surgeries conducted in 2Q22 including those had been postponed during various MCO vs. 2Q21 (when Malaysia was under MCO and FMCO), (ii) ongoing promotions such as giving out vouchers and discounts via online platforms, and (iii) better costs control after experiencing various lockdowns.

• QoQ, core net profit jumped 77.2% due to an increase in refractive and cataract surgeries conducted in the current quarter as compared to 1Q22 which includes the shorter festive February month.

• Moving forward, we expect most branches’ performance will gradually return to pre Covid-19 level. Meanwhile, the setup of its first satellite clinic in Taman Sutera located in Skudai, Johor, as well as the new ACC in Bahau, Negeri Sembilan is on schedule, aiming to start operation by September 2022. A surgeon who is currently based in Seremban ACC will be relocated to the new Bahau branch.

• On 30th May 2022, OPTIMAX entered into a Memorandum of Understanding with Sena Resources Sdn Bhd (SENA) and Kempas Eye Specialist Hospital Sdn Bhd (KESH), whereby SENA is to construct a private eye hospital and rent it to OPTIMAX. The eye hospital that is expected to be operational by 2024 will allow OPTIMAX to expand its services within the southern region area of Peninsular Malaysia.

• Also, the eye hospital will leverage on OPTIMAX’s existing ACC and satellite clinic which are located in Johor Bahru, Muar, Kluang, and Segamat for referral and to provide follow-ups for patients. It is envisaged to meet the anticipated rise in demand for eye treatment services from neighbouring countries such as Singapore and Indonesia, particularly following the construction and launch of the Johor Bahru Singapore Rapid Transit System.

Valuation & Recommendation

• As the reported earnings came in above our expectations, we upgrade our FY22f earnings forecast by 7.9% to RM13.7m, taking into account the higher-than-expected refractive and cataract surgeries conducted especially the postponed surgeries during various MCO. We made no change to our FY23f earnings forecast at RM14.0m FY23f. We believe the easing Covid-19 restrictions and the continuous expansion of the ACC network will bode well for OPTIMAX’s longer term perspective.

• We maintained our BUY recommendation on OPTIMAX with a revised target price of RM1.04 (from RM0.94) as we rolled over to FY23f earnings. The target price is based on the assigned target PER of 40.0x to our revised FY23f EPS of 2.6 sen.

• Risks to our recommendation include shortage of skilled eye surgeons for the new ACC and the upcoming eye hospital. Besides, the post-Covid-19 environment remains uncertain as immunity wanes. Any emerge of new variants may result in movement restrictions and postponement of surgeries.

Source: Mplus Research - 22 Aug 2022