Optical and F&B segments to grow further. Accounting for 83% of the group’s 9M22 revenue, the optical segment is expected to grow in line with new store openings and new corporate clients, evidenced by the burgeoning corporate sales after signed up more corporate clients in early 2022. As the month of Dec marks most of its corporate clients’ FYE, Dec sales from the corporate client segment is expected to be strong as employees rush to utilize their benefits. Separately, FOCUSP has launched 15 optical stores YTD and is targeting 12-15 new stores in FY23. The expansion in the optical business will enable the group to bargain for higher rebates from its key suppliers which are mainly the established foreign brands.  

For F&B segment, FOCUSP is in an advance stage of discussion with its airline corporate client, which would bump up the CK2 utilization rate to 80% (from 50%) should the deal materialize. Meanwhile, sales from other corporate clients remain stable.

Brace for a strong 4Q22 earnings. Though management shared that optical sales was relatively soft in Nov due to the lower footfall to malls amid the World Cup and GE15, management believes that the momentum will pick up strongly in Dec -Jan on the back of year-end sales and CNY. In fact, 4Q tends to be FOCUSP’s seasonally stronger quarter due to the recognition of rebates of optical sales. With FOCUSP having more store counts and corporate clients than before, we opine that 4Q22 will deliver a stellar end to FY22.

Main board listing. After meeting the main market listing requirements, FOCUSP has secured SC’s approval to grant its listing to Main market in Nov (proposed in Aug). The move will be another strong catalyst for share price rerating as it allows FOCUSP to gain access to a wider investor base.

Pending breakout. At RM0.82, FOCUSP is trading at an undemanding 7.5x FY23 P/E (48% discount against its 5-year average of 14.7x), which has yet to reflect the positives, in our view. Hence, we advocate accumulate stance in FOCUSP to ride on the catalysts abovementioned. Technically, FOCUSP is pending for a long-term resistance breakout of RM0.83. A successful breakout above the said hurdle will signal a new up-leg toward RM0.88-0.96-1.05. Cut lost at RM0.70.

Source: Hong Leong Investment Bank Research - 2 Dec 2022