FOCUSP: Strong Optical Segment Drives Solid Earnings, Positive Outlook Ahead

Performance Review

A recent research report from RHB highlights that core earnings for the nine months ended 3Q25 met expectations, primarily propelled by robust performance within the optical segment. The investment bank maintains a positive outlook, anticipating continued growth driven by strategic expansion and a turnaround in its food and beverage (F&B) division.

For the first nine months of 2025 (9M25), core profit aligned with forecasts, largely attributed to the strong showing of the optical segment. This growth was fueled by contributions from both new and existing outlets, reinforcing the company’s market leadership in the optical retail space. Despite a 5.3% year-on-year (YoY) increase in 9M25 revenue to MYR220.2 million, overall core profit saw a modest decline of 4.4% YoY. This was mainly due to persistent losses in the F&B segment, which had recorded a profit in 9M24. However, the F&B segment showed a quarter-on-quarter (QoQ) improvement, as revenue began to scale against its high fixed-cost base. The optical segment, conversely, demonstrated strong QoQ growth of 2.7% and a significant 9.9% YoY increase in contribution.

Future Outlook

Management expects the optical segment to experience a rebound in earnings during 4Q, aligning with seasonal peaks from corporate benefit claims and festive spending. The company remains focused on expanding its store network, with plans to open four additional outlets in East Malaysia this year.

The F&B segment is showing promising signs of traction, having secured three new B2B clients, including a premium convenience store chain and two fast-growing coffee brands, with small-batch orders commencing in 4Q25. Further potential contribution from a local fast-food client is also in the qualification phase, expected by early 2026. While the immediate impact of these new customers is expected to accelerate breakeven efforts, larger-scale orders, estimated at MYR5 million, could potentially uplift FY26F earnings by an additional 5-6%.

Investment Recommendation

RHB maintains its “BUY” recommendation for the company, reiterating a target price of MYR0.74. This valuation, based on a discounted cash flow (DCF) methodology, implies an 11x FY26F P/E, representing a c.15% discount to its 3-year average P/E of 13x. Key risks highlighted include potential delays in expansion plans and the loss of key corporate clients. The investment bank views the company’s valuations as compelling, trading at a single-digit P/E with attractive dividend yields of approximately 6%.