Initiate with BUY. Strong proxy to eye care sector

Optimax is the largest private pure-play provider of eye specialist services listed in Malaysia, providing treatment for eye disease and disorders, and refractive correction surgeries. It offers a diverse array of eye specialist services and has the broadest geographical presence in Malaysia with 13 specialist centres. It is currently listed on the ACE Market of Bursa Malaysia but is expected to transfer to the Main Market by 4Q22. We initiate coverage with a BUY rating and a target price of MYR0.74 with potential upside of 27%, inclusive of 2.9% FY22E dividend yield.

Healthy balance sheet to drive ongoing expansion

Optimax is currently expanding its network of eye specialist centres, with plans to open a new ambulatory care centre (“ACC”) in Bahau, Negeri Sembilan and a new eye specialist hospital in Kempas, Johor. We expect the Kempas hospital to be operational by 2H24 and see it as a major contributor to future revenue. The expansion will be financed by its net cash position and steady cash flows. We are also positive on Optimax’s long-term growth prospects following its MOU with Selgate Group of Hospitals to establish eye specialist facilities in its hospitals. There is also potential for further domestic or regional growth.

Modest FY21-24E net profit CAGR of 8.9%

With our conservative assumptions for revenue growth and anticipation of modest margin compression as a by-product of its ongoing expansion over the short-to-medium term, we forecast a 3-year FY21-FY24E net profit CAGR of 8.9% (FY18-FY21: 40.4%). Reflecting Optimax’s promising long- term growth prospects, we forecast a 6-year FY24E-FY30E revenue CAGR of 10% (FY16-FY21: 24.3%) derived from the operationalization of its upcoming Kempas hospital and successful follow-through execution following the MOU with Selgate Group of Hospitals.

Initiate BUY with target price of MYR0.74

Our TP of MYR0.74 is derived from a DCF valuation discounted at cost of equity of 10.5%. Our cost of equity is derived from a 4.5% risk free rate, 10.5% market return, a beta of 1.0 and an assumed terminal growth of 3%. We also assume a dividend payout ratio of 60% moving forward.

Source: Maybank Research - 28 Jul 2022