FocusP’s chalked in 1Q22 core PAT of RM6.0m (QoQ: -36.1%, YoY: +86.0%). This trumped expectations, accounting for 34% and 36% of our and consensus full year forecasts, respectively. We lift our FY22-FY23 forecast by 14% and 10% respectively to account for higher sales. Reaffirm our BUY rating, with higher TP of RM1.34 (from RM1.18) pegged to unchanged 22x PE of FY22 EPS. We remain confident on FocusP’s scalable business model as we reckon that both optical and F&B segments are poised able to ramp up fully with resumption of economic activities.

Exceeded expectations. FocusP registered in 1Q22 results with revenue of RM51.9m (QoQ: -18.5%; YoY: +22.2%) and core PAT of RM6.0m (QoQ: -36.1%, YoY: +86.0%). This trumped expectations, accounting for 34% and 36% of our and consensus full year forecasts, respectively. The deviation was on the back of stronger-than-expected top line. Core PAT was arrived after minor adjustments for impairment loss on PPE, PPE written off and loss on forex amounting to RM343k.

Dividend. Declared single interim dividend of 1.5 sen/share (1Q21: 1.0 sen/share); ex-date on 13 June 2022.

QoQ. Top line eased by -18.5% to RM51.9m, dragged by the decline in optical related products (-21.5%) and F&B (-3.5%), offsetting the growth in franchise management (+8.6%). Bottom line reduced by -36.1% in tandem with lower sales due to seasonality coupled with lower EBITDA margin recorded (1Q22: 34.2%, 4Q21: 40.9%). Note that 4Q is typically a disproportionately stronger quarter for FocusP as the optical division receives rebates from major suppliers for meeting sales targets for the year. Historically, core PAT in 4Q20 and 4Q21 accounted for 50.1% and 66.3% of full year earnings, respectively.

YoY. Revenue leaped by +22.2% attributable to growth across all three segments in optical related products (+17.7%), F&B segment (+43.8%) and franchise management (+7.0%). Core PAT registered an impressive growth of +86.0% on the back of (i) improvement in sales as the group was impacted by MCO2.0 in 1Q21 and; (ii) rise in EBIT margin (+3.6ppt) driven by higher contribution from optical related products.

Outlook. We are upbeat with the group’s strong results despite traditionally being the weaker quarter. The strong YoY growth was thanks to the robust footfall traffic in malls following the resumption of economic activities. We opine Southern Region stores would experience upside in sales following the reopening of Singapore Malaysia border. To take advantage from this, we understand FocusP has opened two new optical stores in Johor Baharu in 1Q22. The group has successfully launched Anggun Optometrist in Sunway Pyramid in April. Recall that this new brand segment targets to cater for the untapped mid-high end Malay market. Management expects ticket size to be higher from this target market. The expansion in optical business will enable the group to bargain for higher rebates from its key suppliers which are mainly the established foreign brands. FocusP orders from corporate clients in F&B remain steady with new SK Japanese customer recently on board. We gather that discussion from Singapore CVS and other local well known chains are still taking place.

Forecast. We updated our model for FY21 audited accounts, introduce in FY24 forecasts. We lift our FY22-FY23 forecast by 14% and 10% respectively.

Reaffirm BUY, TP of RM1.34. Reiterate BUY, with higher TP of RM1.34 (from RM1.18) pegged to unchanged 22x PE of FY22 EPS. We remain confident on FocusP’s scalable business model as we reckon that both optical and F&B segments are poised able to ramp up fully with resumption of economic activities.

Source: Hong Leong Investment Bank Research - 26 May 2022