Key takeaways from our recent engagement with Focus Point’s management: i) 2H23 is expected to be better than 1H23, ii) expansion plans are on track and iii) securing new corporate clients in the F&B division. In all, we maintain our Buy recommendation with an unchanged TP of RM1.11 based on a PE multiple of 15.0x against CY24 EPS.

Resilient Optical Business

To recap, optical sales remained the critical contributor to Focus Point, accounting for 81% of 6M23 revenue. 6M23 optical sales grew by 2.0% to RM99.1mn, driven by three new optical outlets (Hartamas Shopping Centre, Aeon Station 18 and JB City Square). Thereafter, Focus Point opened two more new optical outlets (Mydin Tunjong in August and Pavilion Damansara Heights in October) and is on track to open three more optical outlets (TRX, Subang and Klang) in 4Q23.

Meanwhile, we gather that the group has secured a few shops via the franchise with the Focus Point Sightsavers programme (focus on converting street shop optical outlets) with an initial paid-up of only RM50k. Overall, we expect optical sales to surge in 4Q23 due to seasonality (festive and higher corporate sales).

Turnaround in the F&B Division

The F&B division reported a loss before tax of RM1.0mn in 1H23 (vs. PBT of RM1.3mn in 1H22) despite a higher revenue of 6.9% to RM19.0mn. We attribute the losses to higher staff costs as the group recruited more headcounts in 1Q23 (to prepare for future new corporate client orders). Positively, we expect the F&B division to turn around in 2H23, driven by price revision and lower staff costs.

YTD, the group has opened 2 Komugi outlets (Kuchai Lama in February and Melawati Mall in November), bringing the total number of Komugi outlets to 13 in Malaysia. We understand that management will continue to look for new locations to open its high street concept Komugi outlet to serve the local communities in the residential area. Meanwhile, Central Kitchen 1 and Central Kitchen 2 utilisation rates are expected to hover at 100% and 50%, respectively. Overall, we project the F&B division to grow by 10.2% in FY23, driven by higher orders from existing customers and potential new clients coming on board.

Results Preview

No change to our FY23-FY25 earnings estimates. We expect 3Q23 performance to be flattish QoQ (vs. RM7.2mn net profit in 2Q23) but expect a much better performance in 4Q23 due to the festive period. Meanwhile, we expect a higher dividend of 3.5sen/share in FY23F versus 2.1sen/share in FY22. At Focus Point’s current share price, this implies a forward yield of 4.5%.

Valuation & Recommendation

Maintain Buy with an unchanged target price of RM1.11/share based on an unchanged 15.0x CY24 EPS.

Source: TA Research - 3 Nov 2023