More corrective surgeries to lift Optimax’s earnings

PETALING JAYA: Optimax Holdings Bhd’s earnings are expected to recover this year, on the back of continued growth in total surgery numbers, normalisation of pre-operation costs, as well as the completion of a transit system linking Johor and Singapore.

Maybank Investment Bank Research (Maybank IB Research) said that the eye specialist services provider’s new ambulatory care centres (ACC) in Petaling Jaya, Sabah and Cambodia, which were expected to be fully operational in the second half of 2024, would boost surgery capacity in line with higher demand for eye-care in Malaysia.

The research house also said the higher prevalence of myopia or near-sightedness among Malaysians is expected to further contribute to stronger demand for refractive surgery.

“This is positive for Optimax in our view, as refractive surgery typically registers higher revenue intensity compared to cataract surgery, especially with the introduction of new treatment technology called ReLex Smile Pro”, the research house said, adding that the the new technology is higher in terms of pricing, with shorter surgical time and offers better margins.

The group’s higher pre-operation costs are also expected to normalise as the ACCs mature, which should be reflected positively in its fourth quarter results.

Pre-operation costs include the cost of staff and inventories or consumables bought in advance, as well as high depreciation for recent expansion.

Maybank IB Research said Optimax also stands to benefit from the completion of the Johor Baru–Singapore Rapid Transit System (RTS), as it is expected to boost medical tourism in Malaysia, especially in the southern region.

This is particularly beneficial for the group’s upcoming Kempas Eye Hospital in Johor Baru, which is slated for completion in the first quarter of financial year 2025 (1Q25), as it is located near the RTS station.“We are positive on Optimax’s potential to capitalise on the region’s medical tourism with the Johor-Singapore Special Economic Zone and the RTS link as catalysts.

“We understand that Optimax’s pricing for the ReLex Smile laser refractive surgery, is about 70% lower compared with the average in Singapore and about 18% lower than the averages in Indonesia and the Philippines,” the research house said.

Additionally, the research house expects further upside from the possibility of the company being added to the panels of several big insurers in 1Q25, on top of its existing tie-ups.

Maybank IB Research said it was forecasting a compounded annual growth rate in revenue and earning before interest, tax, depreciation and amortisation of 8% and 9%, respectively, over the next three years. The research house added that the forecast was based on the expectation of surgery growth of 8% and 6% for the cataract and refractive surgical segments, respectively, over the time frame.

“In our forecasts, we have assumed 18% surgery growth in Optimax’s cataract and refractive segments this year. Further upsides beyond 2025 are pending the operational launch of the Kempas Eye Hospital,” it added.

The research house set a “buy” call on Optimax with a target price of 87 sen, implying a 29 times price-earnings ratio (PER), which is close to its five-year 12-month forward PER mean of 20 times.

Optimax shares closed at 58 sen yesterday.