2025: The dust settles

Post-expansion, we remain positive on expectations for continued growth in total surgery numbers, higher refractive surgery case-mix blend, and gradual normalisation of pre-operational costs. We are also optimistic on its medical tourism edge in the Southern region upon completion of the RTS link connecting Johor Bahru and Singapore, but remain cautious on potential operational delays of its eye hospitals under construction. Maintain BUY with an unchanged DCF-TP of MYR0.87 (ke: 10.5%, LTG: 3%).

Refractive surgery growth drives revenue intensity

We expect greater growth in total blended surgery numbers (FY25E: +18%) to be mostly driven from (i) higher overall demand for eye-care, and (ii) higher revenue intensity from healthier refractive surgery case-mix (the refractive segment typically registers higher margins than cataract surgery). The operational commencement of its newest ACCs in Atria, Kota Kinabalu and Cambodia (adds +8 more OTs) should further support OPTIMAX’s surgical capacity, as demand expands in tandem with the median age and wealth of the population.

Normalisation of high pre-ops costs

9M24’s revenue uplift (on the back of greater revenue intensity and overall rebound in total surgery numbers) had partially offset high pre-operational costs (i.e. costs of pre-hired staffs and inventories/consumables bought in advance and high depreciations on recent greenfield expansions) of the recent ACCs. We are optimistic on seeing some preliminary recovery in the upcoming 4Q24 results as earnings from these ACCs materialise.

Potential beneficiary of RTS link

Beyond 2025E, key re-rating catalysts will be the operational commencement of Kempas and Setia Alam eye hospitals, as well as significant developments in its plastic surgery segment. Kempas Eye Hospital (target completion in 1Q25) also stands to leverage from RTS link to boost OPTIMAX’s potential in the medical tourism space. Our earnings forecasts and DCF-TP of MYR0.87 remains unchanged.

Source: Maybank Research - 5 Feb 2025