OPTIMAX Holdings Bhd, the largest Bursa Malaysia-listed private pure play eye specialist service provider, is posed to be an attractive proxy for Malaysia’s ageing population and rising affluence.
With its established track record, CGS-CIMB Research also expects Optimax to benefit from rising medical insurance penetration as cataract surgeries will form circa 31% of the company’s FY2022F revenue (excluding its COVID-19 vaccination services).
“Demand for refractive surgeries (circa 37% of revenue) should also be boosted by improving affluence,” opined analyst Sherman Lam Hsien Jin in an initiating coverage report. “We project capex of RM11 mil-RM12 mil per annum in FY2022-FY2024F as it expands its network to drive future growth.”
CGS-CIMB Research initiated coverage on Optimax with an “add” rating and a target price of RM1.47 (28 times CY2023F price-to-earnings ratio [P/E]) after factoring in potential dilution from full conversion of outstanding warrants into shares.
The ACE Market counter currently has a network of 13 specialist centres (12 ambulatory care centres and one hospital) nationwide. In a nutshell, Optimax is involved in treatment of eye diseases/disorders (mainly cataract), refractive/oculoplastic surgeries, eye examinations, marketing of food products and COVID-19 vaccinations (since May 2021).
“After the 26% share price drop since April last year (possibly due to overhang from warrants), its FY2022F P/E is at attractive 50% discount to (0.9 standard deviation below) AIER’s (American Institute for Economic Research) 10-year mean,” reckoned CGS-CIMB Research.
“Its re-rating catalysts include (i) strong earnings per share (EPS) growth during FY2022-2204F; and (ii) a rise in its institutional holdings (early-May 2021: circa 9%) while its downside risks are expansion plan delays, longer gestation for new centres and further severe movement control orders (MCOs).”
According to CGS-CIMB Research’s channel checks and analysis, the market competition for Optimax is fairly benign due to (i) the limited number of large players; (ii) rational pricing and marketing practices; (iii) major players’ healthy return on invested capital (ROIC); and (iv) fairly high barriers to entry given the industry’s highly-regulated nature.
“This should help sustain the growth of its revenue intensity,” the research house pointed out. “We believe Optimax’s 15-year track record in performing cataract surgeries and 26-year experience in the eye specialist industry stand in good stead among this market segment.”
The World Bank’s data has shown that Malaysia’s population aged above 50 years posted a nine-year compound annual growth rate (CAGR) of 3.7% between 2011 and 2020 to reach 6.7 million, thus 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 FY2016-2021.
At 11.18am, Optimax was up 3 sen or 2.46% to RM1.25 with 721,300 shares traded, thus valuing the company at RM338 mil. – April 7, 2022
