Maintain BUY with unchanged DCF-TP of MYR0.86

FY23 core net profit (CNP) fell short at only 93%/95% of our/consensus estimates on subdued pick-up in surgery numbers and higher-than- expected costs. We lower FY24E/FY25E CNP by -19%/-17% to factor in higher depreciation and marketing costs, and introduce FY26E. We remain optimistic on Optimax, supported by resilient demand and strategic expansion plans. BUY maintained with an unchanged DCF-TP of MYR0.86.

4Q23 hit by high pre-operational costs

Staff costs rose (+16% QoQ, +14% YoY), offsetting the 10% QoQ revenue uplift which we believe came from higher surgery take-up. Coupled with higher-than-expected 4Q23 depreciation (+10% QoQ, +30% YoY) and marketing costs due to new clinic/ACC openings, they dragged FY23 CNP to MYR12.9m (-12% YoY). The bulk of the higher costs is due to pre-hiring of medical staff and expenses on renovation for its expansion, which should normalize in the coming 12-15 months. Optimax announced an interim 0.6sen DPS, bringing FY23 DPS to 1.20sen (50% DPR). We lower our DPR assumptions for FY24E/FY25E/FY26E to 70% (-10ppts).

Key expansion to materialise in FY24E/FY25E

Optimax is optimistic on the opening of a satellite clinic in Taman Melawati and 3 ACCs in Atria (PJ), Kota Kinabalu and Cambodia which should start operating within 1HFY24, as well as an ACC in Kempas (Johor) with a target opening by 2025. We also look forward to the development of its high-margin plastic surgery segment which is slated to operate its 2nd ops in Atria ACC in PJ, targeting the affluent market in Klang Valley.

Beneficiary of a weaker Ringgit

Optimax remains a favourable prospect for health tourism due to its competitive local pricing against regional peers. The weak Ringgit could boost tourism opportunities and provide upside to earnings growth from its Cambodia ACC, which is priced in USD.

Source: Maybank Research - 1 Mar 2024