Maintain BUY With Higher TP of MYR0.86

Optimax’s FY22 core net profit was within our expectations, coming in at  MYR14.7m, making up 100%/97% of our/consensus FY22E earnings forecast. We adjust FY23E/FY24E by +2%/-11%, factoring for minor housekeeping and leaving room for potential delays in the construction of the Kempas hospital, which we now assume to commence operations by FY25 (prev. 2HFY24). We also introduce FY25E forecasts. Maintain BUY with a higher, DCF-based TP of MYR0.86 (prev. MYR0.84).

4Q22: Slight Margin Contraction as New Centres Open

4Q22 core net profit increased to MYR3.8m (+7% YoY, 4% QoQ) aided by maiden revenue contribution from newly opened eye specialist centres,  bringing 4Q22 revenue to MYR28.4m (+6.8% YoY, -1.1% QoQ). We believe the new loss-making centres which opened in 2H22 were the cause of the  EBITDA and PBT margin contractions, both YoY and QoQ. However, net profit margins remained level (+0.1 ppt YoY) or increased (+0.7ppts QoQ)  as minority shareholder resident doctors shared in the losses of the new centres.

Steady FY22 Core Operations; DPS Expectations Met

We remain upbeat on Optimax’s core operations, with FY22 core net profit growing by 20% YoY to MYR14.7m, contributed by higher revenue of  MYR108m (+22% YoY) which was driven by the re-opening of the economy,  resilient demand for eye surgeries, and maiden revenue contribution from  new centres. As expected, Optimax announced a second interim DPS of  1.2 sen, which will be paid out on 30 Mar 2023. This brings total DPS  announced for FY22 to 2.4 sen (1.2 sen announced in 3Q22), which translates to total dividends of MYR13.0m and a dividend payout ratio of  88% of core net profit. We maintain our DPR assumptions of 80% for  FY23E/FY24E/FY25E.

Expansion Plans Continue

In the 3Q22 results briefing, management shared that the Bahau ACC and  Cheras satellite clinic were fully operational by end-3Q22, with 2 new satellite clinics slated to open in 4Q22. Management also shared intentions to open 7 new satellite clinics in FY23. Moving forward, we expect higher revenue contribution from consultations and treatment of other eye diseases, but minor margin contractions as new centres steadily mature.

Source: Maybank Research - 1 Mar 2023