OPTIMAX: Mid-Year Profit Falls Short of Expectations Amid Rising Costs, Target Price Trimmed
| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.68 (+17.2%) |
| Last Traded | RM0.58 |
| Recommendation |
The company’s core net profit for the first six months of 2025 (6M25) fell below both TA Securities’ and consensus expectations, accounting for only 43% of full-year forecasts. This miss was primarily attributed to weaker-than-expected margins stemming from elevated operating costs and underutilisation at its new centre.
Performance Review
Despite the mid-year shortfall, the second quarter of 2025 (2Q25) saw a sequential rebound in earnings. Revenue for 2Q25 climbed 13% quarter-on-quarter (QoQ) to RM34 million, recovering from seasonal softness experienced in 1Q25. This improvement was driven by a higher surgery turnover following the resumption of procedures deferred during festive celebrations. Geographically, revenue grew across all regions except Cambodia, with East Malaysia recording the strongest growth of 25% QoQ, boosted by contributions from the Kota Kinabalu centre which achieved EBITDA breakeven. Central Malaysia also remained a significant contributor, posting 10% QoQ growth. Consequently, 2Q25 core earnings improved by 21% QoQ to RM4 million.
Challenges and Outlook
Looking ahead, while the company anticipates an improvement in its utilisation rate in the second half of 2025 (2H25), operating expenses are expected to remain elevated as the group ramps up medical staffing in preparation for upcoming capacity additions. TA Securities has revised down its EPS forecasts for 2025-2027E by 3-6% to account for these higher operating costs. Key downside risks include soft consumer spending, which could lead to lower foot traffic, potential delays in expansion plans, and a shortage of licensed medical practitioners.
Investment Recommendation
TA Securities maintains a “BUY” rating on the stock, though its 12-month target price has been lowered to RM0.68 (from RM0.70 previously). The revised target price is based on an unchanged 19x PE multiple on 2026E EPS. The investment bank continues to favor the company as a local niche operator in the eye-care segment, highlighting its aggressive expansion plans as a driver for strong earnings growth. Current valuations are considered undemanding, with the stock trading at -2 standard deviations below its 3-year mean.
