We remain upbeat about Focus Point’s future growth prospects, premising on: i) higher F&B contribution, ii) launch of a new frozen yoghurt brand, iii) expansion of new optical outlets, and iv) higher tourist arrivals. In all, we maintain our Buy recommendation with an unchanged TP of RM1.11 based on PE multiple of 15.0x CY24 EPS.

Boosting F&B Contribution

To recap, Focus Point ventured into the F&B industry in 2012 via Komugi, a premium Japanese bakery. Currently, the group has 12 Komugi outlets in Klang Valley and one in Negeri Sembilan, contributing to 46% of F&B sales. Meanwhile, Focus Point has also started supplying pastry products to large corporate customers, including supermarkets, convenience stores, airlines and coffee-chain restaurants, which made up of 54% of its F&B revenue.

Moving forward, the group will open 2-3 new Komugi outlets in Klang Valley and aims to secure new corporate customers. In addition, Focus Point will also launch a new brand concept, a pilot project focusing on frozen yogurt with the first outlet to be opened at Mid-Valley Megamall in 1Q24. We understand that pricing will be about 20% lower than llaollao while margins will be higher than its bakery business due to lesser wastages. Overall, we are positive on company’s concerted effort in driving F&B contribution, which we expect it to grow to circa-25% (from 16% currently) over the coming two years.

Strengthening Optical Presence

As people spending more time on gadgets and the prevalence of myopia among Malaysians, we believe that eyewear business will remain resilient. For 2024, the group targets to open 10-12 optical outlets and expects to grab some market share from those mom-and-pop shops via its recently launched Focus Point Sightsavers programme. This programme aims to convert street shop optical outlets, introducing the new image about its eyewear profession to smaller second and third-tier cities such as Muar and Taiping.

Moreover, the growth in retail sales will come from marketing and awareness activities such as the World Sight Day roadshow and 360° Advanced Primary Eye Care campaign. Meanwhile, the increase in tourist arrivals is expected to boost sales of its eye care centres and food outlets. Note that the group has about 20 outlets in Johor that will benefit from Singaporean travellers besides outlets at tourist hotspots like KLCC, TRX, Genting Premium Outlets and Design Village in Penang. In all, management has set its sights on achieving circa- 10% growth in optical sales for 2024.

4Q23 Earnings Preview

No change to our FY23-FY25 earnings projections. We are optimistic that 4Q23 sales will be a new record high due to the festive period. We anticipate that 4Q23 net profit will improve to RM11-13mn (vs. RM6.4mn in 3Q23).

Note that we have selected Focus Point as one of our stock picks for 2024 as we believe the group will benefit from rising travel demand, turnaround in F&B and growing optical contribution.

Valuation & Recommendation

We maintain our Buy recommendation on Focus Point with an unchanged TP of RM1.11 based on a PE multiple of 15.0x CY24 EPS. We like Focus Point for its growth prospects with catalyst from pursuit of a stronger retail presence, new corporate clients and higher tourism arrivals.

Source: TA Research - 5 Jan 2024