A Shift in Perspective; Maintain BUY With a Higher TP

Optimax’s 9M22 core net profit beats expectations, at 82% of our FY22E and 70% of consensus. 3Q22 core net profit weakness (-32% YoY, -20% QoQ to MYR3.7m) was expected. We had previously expected demand to taper from a weakening economy and the drying up of pent-up demand. Taking cue from 3Q22’s earnings beat, we raise FY22E–FY24E earnings by 10%- 13%. Consequently, our DCF-based TP is also raised to MYR0.84 (+10sen; unchanged 10.5% ke, 3% LTG).

Resilient Demand But Sacrifices in Margins

3Q22’s lower YoY revenue and earnings were mainly attributed to a higher base in 3Q21 from COVID-19 vaccination revenue, which has largely subsided. QoQ, revenue rose 4% but core net profit fell 20% as net profit margin contracted to 12.8% (Q2: 16.6%). We believe this was in line with Optimax’s shift from a 5-day week opening time to 7 days to facilitate increased demand, leading to higher staff costs at 36.5% of revenue (Q2: 35.8%) and other expenses at 11.0% (Q2: 9.3%). There was also a significant rise in profit attributable to non-controlling interest, likely due to strong performance from resident doctors with minority stake in their ACCs.

Upward Revision of Earnings Estimates …

We raise FY22/FY23/FY24E earnings by 10/13/14% on higher surgery volume estimates in FY22E but maintain our assumption of 5% p.a. growth for individual ACCs. We forecast a 3-year (FY21-FY24E) revenue CAGR of 15.6%, with growth catalysts including the opening of the Bahau ACC, Kempas Hospital (assumed to be operational by 2H24) and the expansion of the satellite clinic network.

… and Dividend Payout Forecasts

Optimax announced an interim DPS of 1.2sen (MYR6.5m) to be paid on 23 Dec 2022. Based on its payout frequency in FY21, we expect a 2 nd interim DPS in 4Q22 of 1.2sen. This translates to a DPR of 79% for FY22E. We raise DPR expectation for FY23E-FY24E to 80% (from 60%).

Source: Maybank Research - 30 Nov 2022