FOCUSP: Strategic Pivot Fuels Strong Performance, Analyst Maintains Buy

A leading diversified eyewear and F&B group has showcased robust financial performance, primarily propelled by its strategic shift towards high-value medical eyecare services and stringent cost management within its F&B division. Despite certain segmental challenges, the overall outlook remains positive, underscored by a strong balance sheet and attractive returns for shareholders.

Performance Review

The core optical segment demonstrated continued strong growth, achieving record results. This success is largely attributed to a strategic pivot towards high-value medical eyecare, leveraging an extensive network of 206 outlets across Malaysia and integrating AI-powered diagnostic tools like AirDoc for early eye disease detection. This differentiation from traditional optical retailers is expected to enhance customer retention and sustain margins in an increasingly competitive retail environment.

Conversely, the F&B segment, particularly its Komugi brand, presented a more challenging picture. While FY25 revenue remained stable at RM44.2 million, the segment posted a RM3.1 million loss. This was mainly due to rising operating expenses and one-off write-downs. Management is actively pursuing a rationalization strategy, focusing on optimizing its 14 self-owned outlets in Malaysia and supporting franchise growth in the Philippines, where it currently operates 25 outlets. Investors are advised to closely monitor this segment for a potential turnaround as cost-control measures are expected to yield results in the coming quarters.

Capital Management and Shareholder Returns

A significant highlight of the current fiscal period is the group’s strengthened balance sheet, maintaining a net cash position as of December 2025. This financial strength provides substantial flexibility for funding future expansion, particularly into East Malaysia, without the need for equity dilution. Furthermore, the board has institutionalized a 50% dividend payout ratio with quarterly distributions, culminating in a record-high dividend of 3.563 sen for FY25. This move signals management’s confidence in sustained cash flow generation and provides a solid yield floor for investors.

Future Outlook and Institutional Support

The company plans to intensify its outlet expansion, targeting approximately 10 new outlets annually between FY26E-FY28E. A key catalyst for enhanced institutional appeal is the company’s recent inclusion in the FTSE4Good Bursa Malaysia Index (December 2025), FTSE4Good Bursa Malaysia Shariah Index (December 2025), and Bursa Malaysia Quality 50 Index (January 2026). These recognitions, coupled with an improved ESG score, are expected to attract greater institutional support, aligning with the increasing mandate for ESG criteria among institutional funds. The investment bank noted a slight 3% trim to its FY26E core earnings, reflecting adjustments to the revenue model following the closure of one Komugi and Hap&Pi Kiosk in FY25.

Investment Recommendation

Despite minor adjustments to future earnings forecasts, the investment bank reiterates its “BUY” recommendation. A new target price of RM0.66 (previously RM0.68), derived from applying a target P/E multiple of 10x to its FY26E EPS of 6.6 sen, remains in line with the FBM Small Cap index’s peak forward P/E. The current last traded price is RM0.50. The compelling dividend yield, projected to be around 6-8%, further supports this positive outlook. Key investment merits highlighted include the company’s strong market leadership with a 15-20% market share, positive tailwinds from regulatory changes banning online sales of optical devices by non-licensed sellers, diversified revenue streams, and resilient private consumption. Potential risks to this recommendation include intense competition, supply chain disruptions, reliance on registered optometrists/opticians, and inflationary pressures.