Maintain BUY with unchanged TP of MYR0.86

Optimax is optimistic on sustained surgery volume growth due to high OT utilisation days, introduction of new technology, and a high-margin surgery mix. We maintain our earnings estimates for FY24E/FY25E/FY26E, having incorporated higher operating costs and expansions. Maintain BUY with an unchanged DCF-derived TP of MYR0.86.

Higher-margin surgery mix to lead growth

Refractive surgery volume grew 5% YoY in FY23 (37% of total FY23 revenue; 4Q23: +9% YoY) with the introduction of ZEISS Smile Pro at end-3Q23, offsetting slower cataract surgery volume (FY23: -2% YoY; 32% of total FY23 revenue; 4Q23: -3% YoY). This is positive as the refractive segment gives higher revenue per surgery and offers greater volume growth capacity given its tech-sophistication and short surgery time (<10 secs for refractive laser treatment). We also continue to be optimistic on Optimax’s new high-margin plastic surgery segment, as volume growth is leading to a 2nd OT launch in April 2024 in its Atria ACC (where 2 out of 4 OTs will be dedicated to plastic surgery).

Spring brings new beginnings

Optimax’s satellite clinic in Taman Melawati has begun operating, and 3 new ACCs (Cambodia, Atria (PJ), and Kota Kinabalu) are targeted to be operational in March/April, which would bring to a total count of 16 ACCs, 7 satellite clinics, and 1 specialist centre by 1H24. We are hopeful that these launches would ease pressure on GP and pre-tax margins that were hit by high pre-ops costs for pre-hiring of medical staff and renovation. That being said, we expect costs to taper only gradually, as there are still plans to hire more doctors ahead of future expansions.

Maintain earnings estimates

Optimax expects construction of its Kempas Eye Hospital and Setia Alam Hospital to finish in 2H24, targeting to operate by early-2025. We maintain our earnings forecasts having imputed FY24E capex of MYR15+m, slightly above management’s guidance, to be conservative.

Source: Maybank Research - 7 Mar 2024