Review

• Focus Point’s 9MFY19 net profit of RM5.2mn (+95.7% YoY) came in at 61.9% of our full-year forecast. We deem the results to be in line as 4Q sales are expected to be stronger due to seasonal effect.

• 9MFY19, PBT increased by 49.2% to RM8.3mn, ahead of 7.4% growth in revenue to RM138.6mn. We attribute the solid performance to higher sales attained by the optical segment and turnaround in its F&B segment. Note that contribution from new stores (RM4.1mn), accounted for circa- 4% of retail revenue.

• Meanwhile, it’s F&B segment PBT improved to RM0.1mn (versus losses before tax of RM1.6mn) due to lower operating expenses as well as higher sales, which grew by 27.8% to RM13.2mn.

• QoQ, PBT declined by 8.0% to RM2.4mn despite revenue growth of 2.3% to RM46.9mn partly due to higher staff cost and distribution expenses. As such, PBT margin fell by 0.6p.p to 5.2%.

• 3QFY19, net profit declined by 26.1% to RM1.3mn mostly due to the adoption of MFRS 16. Based on management guidance, the net impact is a reduction of RM268k to its PAT.

Impact

• No change to our earnings projections.

Outlook

• We expect 4Q19 earnings to be stronger due to seasonality. Note that the group recorded earnings of RM4.5mn in 4Q18, which accounted for 67% of FY18 earnings.

• In terms of new outlets, Focus Point targets to open 2 and 6 new optical outlets in 4Q19 and 2020 respectively to cater for rising optical demand.

Valuation

• Target price is maintained at RM0.54/share based on an unchanged PER of 13.0x CY20 EPS. Maintain Buy.

Source: TA Research - 29 Nov 2019