We recently met with FocusP and came away feeling positive about the group’s prospects going forward. Particularly, we are greatly encouraged by the order volumes to their F&B central kitchen After factoring in increased F&B corporate sales, we raise our FY21/22 forecasts by 9.1%/5.5%. After our earnings adjustments, we raise TP rises to RM1.02 (from RM0.93) based on an unchanged PE of 16x based on FY21 earnings. Maintain BUY.

We recently met with FocusP and came away feeling positive about the group’s prospects going forward.

4Q20 earnings outlook. The reimplementation of CMCO2.0 restrictions in October resulted in lower foot traffic in retail areas in Oct/Nov, impacting FocusP’s optical division. However, management have guided that sales have begun to pick up in Dec due to year end festive season. Seasonally, 4Q is FocusP’s strongest quarter as the optical division receives rebates from its major suppliers for meeting sales targets for the year (core PAT in 4Q18 and 4Q19 accounted for 62.7% and 47.7% of full year earnings respectively).

F&B expansion. FocusP’s new product offerings continue to be a smashing success with their largest corporate client, who continues to grow their outlet count and order more SKU varieties. We understand their newly launched macarons were very well received by consumers, with FocusP resorting to diverting volumes from their own Komugi bakery outlets to their largest corporate client. Their largest corporate client now accounts for RM1.3m sales per month (from under RM0.5m per month in FY20).

Second central kitchen expected to be operational by month-end. With increasing order volumes from existing clients and apparent interest from newer clients, Focus Point’s current central kitchen has reached maximum capacity. We believe the second kitchen will be able to generate ~RM5m per month from corporate sales at maximum capacity. The second central kitchen is estimated to have capex requirements of ~RM3.3m and be operational by month end.

Pursuing food safety certification HACCP and ISO 22000. FocusP are in the process of obtaining HACCP and ISO 22000 certifications. These certifications will allow FocusP to supply baked goods to a wider array of clients locally as well as in Singapore. We feel positively about these certifications, as we understand there have already been enquiries from clients who have been interested in securing the products from FocusP’s central kitchen.

Cataract surgery venture. Currently, FocusP operates a lasik and cataract operation centre in Mid Valley under subsidiary ‘Excelview’. The group intend to expand this business division by leveraging the expertise of their long term partner and medical professional at Excelview to open two more centres in second tier cities.

Forecast. After factoring in increased F&B corporate sales, we raise our FY21/22 forecasts by 9.1%/5.5%.

Maintain BUY. Increasing F&B corporate sales and starting of a second central kitchen should see profitability of the F&B division accelerate. Furthermore, we reckon the possibility of securing new F&B corporate clients is likely given the popularity of their current product offerings. After our earnings adjustments, we raise TP rises to RM1.02 (from RM0.93) based on an unchanged PE of 16x based on FY21 earnings.

Source: Hong Leong Investment Bank Research - 16 Dec 2020