• The group is principally involved in the provision of medical eye care services, ranging from general eye care to the treatment of eye diseases, such as vitreoretinal surgeries, at its 11 ACCs located throughout Peninsular Malaysia.

• Moving forward, we project a 3-year earnings CAGR of 11.7%, with core PAT expected to reach RM5.2m, RM5.6m, and RM6.6m over the next three years, largely supported by (i) establishment of Top Vision International where the group intend to introduce new services, coupled with (ii) expansion of ACC network in Kuala Terengganu, Terengganu and Tawau, Sabah.

• We assign a fair value of RM0.45 per share for Top Vision Eye Specialist Berhad, representing a 36.4% upside from the IPO price of RM0.33. This valuation is based on a P/E ratio of 25x, pegged to the FY25f EPS of 1.81 sen. We believe the ascribed P/E is fair, as the closest peer, Optimax, has a historical and forward P/E range of 26.6-24.6x, while the Bursa Healthcare Index’s P/E ranges around 37.9x-41.4x.

Investment Highlights

Malaysia’s medical eye care industry. In 2023, Malaysia’s medical eye care industry saw a substantial YoY increase of 10.4%, reaching RM775.8m. The said improvement can be attributed to the surge in demand for medical eye care services, which rebounded after delays caused by the movement control orders implemented locally and globally due to the novel coronavirus disease 2019 (COVID-19).

Boom cycle of cataract surgery. Cataract surgeries, which may result from aging, diabetes, or excessive exposure to UV rays from smartphones, have seen an increase in the number of registered procedures, with a CAGR of 9.6% during the period from 2010 to 2018. This has made cataract surgery the most in-demand procedure, constituting c.40% of the total surgeries performed under the Malaysia’s Ophthalmology sector.

Malaysia continued to attract medical tourists. In tandem with the re-opening of international borders after Covid-19, the medical eye care industry in Malaysia has benefited from an increased number of healthcare travellers. According to the Malaysia Healthcare Travel Council, the number of healthcare travellers increased by roughly 51.5%, reaching 850k in 2022 (2021: 561k), while revenue from healthcare travellers more than doubled to RM1.30bn (2021: RM600m) in the same year.

Strong momentum ahead. According to According to Protégé’s report, the medical eye care industry in Malaysia is projected to grow at a CAGR of 10.0%, from RM849.5m in 2024 to RM1,249.4m by 2028, driven by factors like (i) steady population growth and an ageing population, (ii) growth in medical tourism, (iii) the prevalence of lifestyle diseases among Malaysians, and (iv) continuous growth in government expenditure.

Expansion plans into regional markets. Top Vision is embarking on an ambitious expansion strategy to diversify its medical eye care presence. The group plans to broaden its network of facilities across Malaysia, particularly in the Petaling Jaya region, while also exploring opportunities to expand internationally, with a focus on Indonesia. Additionally, Top Vision aims to introduce new sub-specialty services, including corneal transplants, paediatric eye surgeries, aesthetic and oculoplastic surgeries, and refractive surgeries.

Company Background

The group is principally involved in the provision of medical eye care services, ranging from general eye care to the treatment of eye diseases, such as vitreoretinal surgeries, at its 11 ACCs located throughout Peninsular Malaysia. The group does not provide inpatient care and instead offers its services on a day-care arrangement, whereby patients are able to leave the ACCs on the same day as their procedures. The group's principal market is Malaysia.

Business overview

Top Vision's primary business focuses on eye specialist services and related ventures. It offers four main categories of eye specialist services: (i) the treatment and management of cataracts, (ii) vitreous and retinal diseases, (iii) glaucoma, and (iv) corneal, external eye, and anterior segment diseases. Additionally, Top Vision is involved in the distribution of eye care and general health supplements, primarily through TOPWELLNESS SB, to complement its core business of providing medical eye care services.

The majority of its patients are local, contributing RM42.1m, or 97.9% of its revenue, for FYE 2023, while foreign patients contributed RM0.9m, or 2.1% of its revenue, for FYE 2023. During FPE 2024, local patients contributed RM25.4m, or 98.1% of its revenue, while foreign patients contributed RM0.5m, or 1.9% of its revenue.

Financials

Revenue highlights. The group reported a revenue of RM43.0m in FY23, representing an 8.9% YoY increase, or RM3.5m. This growth was mainly driven by: (i) an increase in revenue from services rendered, which rose by approximately 9.4% or RM3.2m, from RM34.6m in FY2022 to RM37.8m in FY2023; (ii) greater patient awareness of the importance of health and preventive measures, which led to increased demand for medical services; and (iii) the commencement of operations at TVESC Kota Bharu in January 2023, along with the full-year revenue contribution from TVESC Taiping. Meanwhile, core earnings stood at RM4.7m for FY23.

Earnings forecasts. Moving forward, we project a 3-year earnings CAGR of 11.7%, with core PAT expected to reach RM5.2m, RM5.6m, and RM6.6m over the next three years, largely supported by (i) establishment of Top Vision International where the group intend to introduce new services such as corneal transplants, surgeries, for paediatric, eye diseases and disorders, aesthetic and oculoplastic surgeries and refractive, coupled with (ii) expansion of ACC network in Kuala Terengganu, Terengganu and Tawau, Sabah.

Valuations

We assign a fair value of RM0.45 per share for Top Vision Eye Specialist Berhad, representing a 36.4% upside from the IPO price of RM0.33. This valuation is based on a P/E ratio of 25x, pegged to the FY25f EPS of 1.81 sen. We believe the ascribed P/E is fair, as the closest peer, Optimax, has a historical and forward P/E range of 26.6- 24.6x, while the Bursa KL Healthcare Index ranges along 37.9x-41.4x.

Investment risks

Dependent on key senior management. Discontinuation of service of the key senior management may disrupt key decision making within Top Vision’s business operations.

Rental and relocation of ACCs. Inability to renew the tenancy or if a tenancy is terminated due to circumstances beyond the Group's control may require relocating the affected ACCs, which could impact its business operations, financial performance, and future growth

Reliant on approvals, licenses, permits or certificates. Failure to comply with applicable laws, regulations, and necessary approvals, licenses, permits, or certificates could result in suspension, revocation, or non-renewal, potentially affecting the group’s ability to continue operations.

Economic, social, political and regulatory risks. The group is exposed to the risk of malpractice, medical negligence or misconduct claims which may arise from errors by the group’s personnel, machine or equipment errors, a lack of adequate pre-operative advice or improper post-operative care for its patients.

Source: Mplus Research - 29 Nov 2024