FocusP’s 4Q19 core PAT of RM4.7m (QoQ: +250.6%, YoY: +5.8%) brought FY19 to RM9.9m (+39.3% YoY). This was above ours and consensus expectations, accounting for 124% and 117% of forecasts, respectively. The stronger-than expected earnings were due to higher-than-expected vendor rebates in the optical division. We raise our FY20/21 foreca sts by 2.5%/1.2% to account for the better earnings from the optical division going forward. Due to the higher earnings, our TP rises to RM0.85 from RM0.84, pegged to an unchanged 17x PE multiple of mid-FY21 earnings. We maintain our BUY rating.

Above expectations. FocusP’s 4Q19 core PAT of RM4.7m (QoQ: +250.6%, YoY: +5.8%) brought FY19 to RM9.9m (+39.3% YoY). This was above ours and consensus expectations, accounting for 124% and 117% of forecasts, respectively. The stronger than-expected earnings were due to higher-than-expected vendor rebates in the optical division and earning contribution of F&B division.

Dividend. None (4Q18: none) (FY19: 1.875 sen, FY18: 0.75 sen).

QoQ. Core PAT rose 250.6% to RM4.7m due to seasonality, as FocusP typically collect rebates from optical suppliers in 4Q after achieving certain sales targets during the year. Note that EBIT contribution from the optical and related products division rose 238.4%.

YoY. Sales grew 11.7% due to growth in the optical division (+13.4%), which was due to higher rebates achieved during the quarter vs 4Q18. In addition to better optical division sales, turnaround in the food & beverage division from increased corporate sales volumes (EBIT: 4Q19: RM0.4m vs. 4Q18: -RM0.4m) led core PAT to rise 5.8%.

YTD. Turnaround in the F&B division (EBIT: FY19: RM1.3m vs. FY18: -RM1.9m) was due to increased sales to corporate clients. In the optical division higher sales were due to (i) opening of new outlets (which accounted for RM6.2m sales); and (ii) 3% sales growth from existing outlets. In addition to better sales, increased vendor rebates led to optical EBIT contribution rising 32.5%. Better performance from both of these divisions resulted in core PAT rising 39.3%.

Outlook. We expect significantly stronger earnings from FocusP’s F&B division from increased orders to corporate clients. Note that the F&B division had already shown profitability since 3Q19. With further increased order volumes beginning in 1Q20, F&B earnings should grow substantially.

Forecast. We raise our FY20/21 forecasts by 2.5%/1.2% to account for stronger-than expected earnings from the optical division and turnaround in F&B divisiongoing forward.

Maintain BUY, TP: RM0.85. After adjusting our earnings higher, our TP rises to RM0.85 from RM0.84 pegged to an unchanged 17x PE multiple of mid-FY21 earnings. We maintain our BUY rating.

Source: Hong Leong Investment Bank Research - 28 Feb 2020