Summary

• Optimax Holdings Bhd’s (OPTIMAX) 1Q23 core net profit advanced 17.9% YoY to  RM3.1m. Although the earnings amounted to 20.0% of our full year forecast of  RM15.5m, and 17.3% of consensus of RM18.0m, we deemed it is broadly in line as  typically the 1Q will be softer due to lower surgeries done during festive season  such as Chinese New Year.

• YoY, the increase in core net profit stemmed from (i) increase in number of  refractive and cataract surgeries across all ambulatory care centres (ACC) and  satellite clinics, (ii) higher contribution from the newly set up satellite clinic, and (iii)  ongoing promotions for eye specialist services through online platforms.

• However, Optimax saw a slight decrease in profit before tax margin, due to  additional staffs hired in advance for the upcoming expansion of the new ACC and  satellite clinics. The impact is expected to be diminished upon the  operationalization of the new ACC and satellite clinics.

• QoQ, core net profit declined 20.4% to RM3.1m, owing to the decrease in revenue  resulted from lower number of refractive and cataract surgeries conducted during  1Q23 as people tend to do surgery after the festive season such as Chinese New  Year. As such, we expect the revenue will rebound in the forthcoming quarters  based on historical trend.

• To date, Optimax has established a network of 13 ACCs, 3 satellite clinics, and 1  specialist hospital, spanning across all regions in Malaysia. Optimax remained committed to expand its presence and brand in Malaysia to cater to medical tourism, targeting to establish 5-7 additional satellite clinics in FY23. In the longer  term, we envision new sources of revenue stemming from Kempas eye hospital and  Setia Alam Hospital (where Optimax will operate a full-service eye specialist centre  on an exclusive basis). Construction is underway for both facilities, with plans for  both facilities to be fully operational by 2025.

• Moving forward, we foresee an improvement in performance for Optimax’s  branches in light of the World Health Organization’s (WHO) officially declaring an  end to the Covid-19 as a public health emergency, coupled with heightened awareness amongst the general public with regards to the importance of eyecare.

Valuation & Recommendation

• Since the earnings came in broadly within our expectations, we kept our forecast unchanged at RM15.5m and RM17.6m for FY23f and FY24f respectively, taking into  account the expected increase in revenue in the forthcoming quarters.

• We maintained our BUY recommendation on OPTIMAX with an unchanged target  price of RM1.15. The target price is based on the assigned target PER of 40.0x to  our revised FY23f EPS of 2.9 sen.

• Risks to our recommendation include the risks of medical and legal claims related  to the provision of its eye specialist services. Besides, the inflationary pressure due  to rising food and energy prices remains as threat to local economy.

Source: Mplus Research - 29 May 2023