FocusP’s results trumped estimates with record high quarterly core PAT of RM10.3m (QoQ: +69.7%, YoY: >100%) which brought 1H22 sum to RM16.3m (YoY: 5x). Top-line continued to expand healthily on the back of recovery in footfall and border reopening. As for F&B, we applaud the continual steady increase of revenue and healthy EBIT margin of 12.5% in 2Q22. We tweak our FY22/23/24 forecasts by +33%/+35%/+36%. Maintain BUY with higher TP of RM1.39 (from RM1.34) pegged to 16x PE on mid-FY23 EPS. We remain confident on FocusP’s scalable business model as we reckon that both optical and F&B segments are poised to ramp up fully with resumption of economic activities.

Trumped expectations. FocusP’s 2Q22 results trumped our/consensus expectation on stronger-than-expected revenues and expansion in EBITDA margin. 2Q22 revenue of RM67.5m (QoQ: +30.0%; YoY: +91.4%) and record high quarterly core PAT of RM10.3m (QoQ: +69.7%, YoY: >100%) brought 1H22 sum to RM16.3m (YoY: 5x). This accounts for 81%/80% of our/consensus full year forecast. Core PAT was arrived after minor EI adjustments amounting to RM352k.

Dividend. None (2Q21: none). 1H22 dividend amounted to 1.5 sen per share (1H21: 1.0 sen per share).

QoQ. Revenue increased by +30.0% to RM67.5m, with improvement seen across segments namely optical related products (+32.2%), F&B (+18.1%), and franchise management (+11.3%). The strong sales momentum achieved was thanks to the full reopening following transition to endemicity. In turn, core PAT notched another high of RM10.3m on the back of (i) higher revenue; (ii) expansion in EBITDA margin by 1.5ppt; and (iii) lower effective tax rate by 2.1ppt (2Q22: 24.8% vs 1Q22: 26.9%).

YoY/YTD. Top line leaped by +91.4% YoY/+53.6% YTD attributable to growths in all segments: optical related products +54.3% YTD, F&B segment +40.8% YTD and franchise management +21.1% YTD. Franchise management recorded higher royalty fees in the quarter. Recall that 2Q21 was affected by the MCO3.0 lockdown between May-June 2021. 1H22 bottom line registered an encouraging growth of 5x to RM16.3m. This was attributable to (i) sales improvement with reopening of borders and economic activities; (ii) rise in EBITDA margin (+5ppt YTD) driven by higher contribution from optical related products; and (iii) lower effective tax rate by 9.0ppt (1H22: 25.5% vs 1H21: 34.6%).

Outlook. We are upbeat with the group’s solid results and reckon that the momentum will continue with the full reopening under endemicity. The strong YoY growth was thanks to the robust footfall traffic in malls coupled with strong sales recorded in Southern Regions stores on the back of border reopening. The group has identified another two additional locations for its new Anggun Optometrist outlets. Recall that this new brand segment targets to cater for the untapped mid-high end Malay 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. As for F&B, we applaud the continual steady increase of revenue and healthy EBIT margin of 12.5% in 2Q22. Additionally, FocusP orders from corporate clients in F&B remain steady with pockets of opportunities from new potential clients.

Forecast. We tweak our FY22/23/24 forecasts by +33%/+35%/+36% to account for deviation above.

Maintain BUY, TP of RM1.39. We roll over our valuation year to mid-FY23 from FY22 previously. In light of rising interest rates environment, we tweak our PE target to 16x (from 22x) which are broadly in line with our retail coverage. All in all, our TP increases from RM1.34 to RM1.39. We remain confident on FocusP’s scalable business model as we reckon that both optical and F&B segments are poised to ramp up fully with resumption of economic activities.

Source: Hong Leong Investment Bank Research - 24 Aug 2022