CGS-CIMB Research positive on Optimax network expansion

by NURUL SUHAIDI / pic source

OPTIMAX Holdings Bhd expected post robust growth driven by its network expansion plan. The growth prospect will also be supported by the ageing population, rising affluence and insurance penetration. 

CGS-CIMB Securities Sdn Bhd (CGS-CIMB Research) in a note yesterday said Optimax will post a strong three-year core financial year 2021 (FY21)-24F earning per share (EPS) compound annual rate growth (CAGR) of 14.7%, due to the growing number of cataract refractive surgeries done, hence improving revenue intensity on take-up of newer-generation procedures and muted competition. 

“Cataract surgeries are a common procedure for ageing patients and we believe Optimax is poised to benefit from Malaysia’s rapidly ageing population,” said CGS-CIMB Research. 

According to the World Bank, data showed that Malaysia’s population aged 50 years and above, posted a nine-year CAGR of 3.7% between 2011-2020 to reach 6.7 million, accounting for 20.7% of the total population in 2020.

“This drove growth in the number of cataract surgeries conducted by Optimax, which delivered a robust five-year CAGR of 24.3% in 

FY16-21,” the report noted. Optimax also announced its network expansion plans during its 4Q21 results briefing that its upcoming Ambulatory Care Centres (ACC) in Bahau, Negri Sembilan, are on track to open by mid-2022F with a target to generate RM3 million to RM4 million per annum of incremental revenue from FY23F. 

It is also set to open four new satellite clinics in FY22F one in Sutera, Johor, to open in 2Q22F, with the rest to open in the Klang Valley in the second half of 2022F (2H22F). 

While for the hospital expansion plan, the total capex for its planned new specialist hospital in Kempas, Johor, which could open in 2H24F projected at RM10 million. 

“Overall, we expect FY22F core EPS to rise at a more moderate 8.1% year-on-year (YoY) (FY21: +98.6% YoY), as we see it being dragged by gestation losses, mainly higher staff, leasing costs and depreciation, from its new specialist centres and tapering contribution from Covid-19 vaccination services which higher margin in our view. 

“If we exclude the latter assuming it garners c15% net profit margin, we estimate underlying FY22F core EPS growth and three-year core EPS and CAGR will be 24% and 22% respectively,” the bank said. 

Besides the ageing population and rising consumer affluence in Malaysia, the research said the company may benefit from the greater prevalence of visual impairments and eye diseases, especially myopia (shortsightedness) and dry eyes, likely associated with increasingly digital lifestyles. 

“Nonetheless, we remain cautious of the key risk such as stringent requirements added or a longer period for licence approvals or renewals by the Ministry of Health. 

“This could result in delays to Optimax’s expansion plans or drag out the gestation for its newly-opened specialist centres, thereby negatively impacting its margins and profitability,” it said.

Since Optimax was listed on Aug 20, the company declared a total dividend per share of 3.8 sen for FY21, implying a payout ratio of 83%. 

Optimax currently does not have a dividend policy, however, its management said during its 4Q21 results briefing that it hopes to keep to a dividend payout ratio of at least 70% going forward. 

“We initiate ‘Add’ rating on Optimax with a target price of RM1.47 pegged to 28 times CY23F price-earnings,” the report noted. 

CGS-CIMB Research has maintained its ‘Add’ rating for Optimax with a target price of RM1.47 per share. 

Optimax undertakes a variety of treatments for eye diseases and disorders whilst being the largest Malaysia-listed private pureplay eye specialist services provider. 

Complementing its core services, the group also provides antioxidant food products for the general wellbeing of an individual. 

To date, it operates 13 specialist centres spanning seven states in the west coast of Peninsular Malaysia and Sarawak, comprising 12 ACCs and one specialist hospital.