Optimax Holdings Bhd’s (Optimax) expansion plans could contribute to return on equity (ROE) recovery in FY25F while earnings are expected to rebound the openings of several ambulatory care centres (ACCs) in the next two years.
However, CGS-CIMB, in its Company Note, reiterate ADD rating, with a lower TP of 84 sen from RM1.11, based on GGM to better
capture its medium-term profitability and growth trajectory.
“Following a disappointing FY23F, we project a strong rebound in earnings by 17.2% and 31.2% in FY24F and FY25F respectively, driven
by revenue growth following the opening of new ACCs in Cambodia, Atria and Kota Kinabalu in FY24F, as well as Selgate Hospital and Kempas Hospital in FY25F,” it said today (Dec 5).
The research house said the stock has de-rated since the start of 2023 and currently trades at 0.5 s.d. below its 3-year mean P/E of 27.3x since listing in FY20.
“Revenue decline and higher costs sink 3Q23 core net profit. Additionally, 9M23 EBIDTA/core EPS disappointed at 61% and 54% of our FY23F forecasts of 66% and 58% of Bloomberg consensus, driven by 3Q23 yoy decline in revenue.
“Coupled with higher staff costs, higher depreciation and preoperational costs, 3Q23 core net profit tumbled 30.7% year-on-year (YoY) to RM2.8 million, while 9M23 core net profit of RM9.7 million was 14.5% down YoY.
CGS-CIMB said Optimax saw its revenue dip slightly by 0.6% YoY in 3Q23, which management attributed to a lack of doctors during the month of September due doctors attending conference held in Vienna for a week and factory visit of its supplier Carl Zeiss.
“While Optimax has since hired more doctors, which should help revenue to recover in the coming quarters, we remain cautious as 4Q is generally a weaker quarter for Optimax due to the festive season, which normally sees fewer surgeries,” it added.
It also noted that the group guides that a few new ACCs in Atria, Kota Kinabalu and Cambodia would likely only be operational by early-FY24F, Optimax has hired additional staff who will need to be trained before the centres start operations.
“It had also hired operation teams and plastic surgery surgeons in 3Q23 in preparation for its plastic surgery licence, which it obtained on 7 Aug 23. All these factors led to 3Q23 EBITDA margin falling 6.6% pts YoY, down 3.3% pts QoQ.
“We believe EBITDA margin could stay suppressed until these new ACCs become profitable in FY24F,” it said.
The research house added re-rating catalyst is strong earnings delivery in FY24-25F while downside risks include delays in its expansion plans and longer gestation period for its new centres.
