FOCUSP: Earnings Fall Short as F&B Costs Weigh, Optical Segment Signals Future Optimism

The company reported a 22.2% year-on-year decline in its core net profit to RM6.6 million for the third quarter of FY2025, primarily attributed to heightened operating costs within its Food & Beverage (F&B) segment. This performance led to cumulative nine-month FY2025 earnings falling below both internal and consensus expectations, accounting for 63% and 65% of full-year forecasts, respectively. The shortfall was largely due to elevated fixed operating costs in the F&B division, which saw its PBT margin contract significantly to -4.1% from 1.0% in 3QFY24.

Performance Review

Despite the profit contraction, the company’s revenue for 3QFY25 saw a 6.2% year-on-year increase to RM74.5 million. This growth was predominantly driven by a robust performance in the optical segment, which recorded a 7.5% year-on-year revenue increase. The optical segment benefited from stronger sales in East Malaysia outlets and an expanding corporate customer base. The F&B segment also contributed to revenue growth, posting a 2.1% year-on-year increase, primarily due to higher retail sales.

However, the improved revenue did not translate to higher profitability for the group. The F&B segment registered a pre-tax loss of RM0.5 million, contrasting sharply with a PBT of RM0.1 million in 3QFY24. This weaker performance was largely due to higher operating fixed costs, including rental increases following tenancy renewals. In contrast, the optical segment delivered a strong PBT of RM10 million, an increase of 4.6% year-on-year, which helped to partially mitigate the losses from the F&B segment. Consequently, the group’s overall PBT margin compressed by 2.7 percentage points to 12.3%.

Future Outlook

Despite the recent challenges, the investment bank maintains an optimistic view on the company’s future prospects. Stronger earnings are anticipated in 4QFY25, driven by seasonal factors and increased corporate spending on optical products. Consumer spending is expected to remain resilient, supported by favorable labour market conditions, targeted assistance programmes, and robust tourism activities.

In the longer term, the company’s growth is projected to be propelled by strategic initiatives, including the opening of at least 10 new stores and rising consumer awareness of vision care. The F&B segment is also expected to stage a turnaround, underpinned by higher central kitchen utilisation rates, ongoing efforts to secure new corporate clients, and the introduction of new product offerings.

The research house maintains its Outperform rating on the company, although it has revised its target price downwards to RM0.57 (from a previous RM0.63) based on approximately 9 times FY26F EPS. The company also declared a second interim dividend of 1.50 sen per share, a slight decrease from 1.75 sen in 3QFY24.