Overview of Optimax Holdings

Optimax Holdings is Malaysia’s largest private pure-play eye specialist service provider, recognized for its comprehensive geographical presence. With 16 ambulatory care centers (ACCs), 8 satellite clinics, and 1 specialist hospital as of 3Q24, the company has established itself as a leader in the healthcare market. Expansion plans are underway with the upcoming Kempas Eye Hospital in Johor and Selgate Setia Alam Hospital in Shah Alam, both slated for operational launch in 2025.

The company’s long-term growth is supported by structural factors such as Malaysia’s aging population, increasing prevalence of refractive errors, and a growing affluent demographic seeking premium healthcare services. Optimax is also poised to benefit from the rise in medical tourism, leveraging its competitive pricing and high-margin surgery mix.

Key Growth Drivers

Expansion of ACCs and Surgical Capacity

Optimax’s growth trajectory is bolstered by its aggressive expansion strategy. The operational commencement of new ACCs in Atria, Kota Kinabalu, and Cambodia in the second half of 2024 is expected to increase total blended surgery numbers by 18% in FY25. These additions will also enhance surgical capacity with eight new operating theaters, catering to the rising demand for eye-care services from both local and foreign patients.

The company’s focus on refractive surgeries, which offer higher revenue intensity and margins compared to cataract surgeries, further supports revenue growth. The introduction of advanced technologies like ReLEx SMILE Pro is expected to attract more patients by offering shorter surgical times and superior outcomes.

Capitalizing on Medical Tourism

Optimax is well-positioned to benefit from Malaysia’s burgeoning medical tourism industry. The Kempas Eye Hospital, located near the upcoming Rapid Transit System (RTS) link connecting Johor Bahru and Singapore, is expected to serve as a key driver for cross-border patient inflow. The RTS link, scheduled for completion by January 2027, will significantly improve accessibility, attracting medical tourists seeking cost-effective yet high-quality eye treatments. Optimax’s pricing for ReLEx SMILE is approximately 70% cheaper than Singapore’s average, highlighting its competitive edge in the region.

Financial Performance and Projections

Revenue and Earnings Growth

Optimax’s revenue is expected to grow at a 3-year compound annual growth rate (CAGR) of 8%, driven by strong demand for cataract and refractive surgeries. EBITDA is projected to grow at a 9% CAGR over the same period. For FY25, the company forecasts an 18% increase in surgery numbers, supported by the fully operational ACCs and the completion of two specialist hospitals in Setia Alam and Kempas.

Pre-operational costs incurred during the setup of new ACCs have weighed on short-term earnings. However, these costs are expected to normalize, paving the way for higher profitability in FY25 and beyond. The inclusion of new insurance and takaful operator panels in 1Q25 is also anticipated to boost patient volume and incentivize cashless payments.

Valuation Metrics

Optimax is currently trading at a share price of MYR 0.59, with a 12-month target price of MYR 0.87, representing a potential upside of 53%. The discounted cash flow (DCF)-based target price implies a forward price-to-earnings ratio (PER) of 29x for FY25, aligning closely with its 5-year historical average. The company’s financial health remains robust, with net cash positions across FY22 to FY26 and a strong free cash flow yield projected at 12.8% for FY25.

Environmental, Social, and Governance (ESG) Considerations

Environmental Initiatives

Optimax has taken steps to improve its environmental sustainability. The company tracks electricity, energy, and water consumption, and has enlisted ISO 14001-certified vendors to manage waste disposal. It is also developing a framework for data collection on greenhouse gas (GHG) emissions, with plans to disclose Scope 1, 2, and 3 emissions by FY24.

Social Contributions

Optimax maintains robust social responsibility programs, including free eye check-ups and treatments for underserved communities. Since 2021, the company has carried out 124 charity events, contributing MYR 56,760 in donations and benefiting over 845 individuals. Additionally, it supports Malaysia’s immunization efforts by offering COVID-19 vaccination services at select ACCs.

Governance Practices

The company has a balanced board composition with 50% independent directors and 37% female representation. However, frequent related-party transactions (RPTs) involving the founder and major shareholder, Tan Sri Dato’ Tan Boon Hock, pose potential governance risks. The company has committed to obtaining shareholder approval for material RPTs to ensure transparency.

Risks and Challenges

While Optimax’s growth prospects are promising, the company faces potential risks. These include delays in expansion plans, disruptions from contagious disease outbreaks, and reputational risks from medical malpractice. Additionally, a weakening of consumer sentiment could adversely impact demand for high-margin, cosmetic surgeries like refractive and plastic surgeries.

Conclusion and Recommendation

Maybank Investment Bank maintains a “BUY” recommendation for Optimax Holdings, with a target price of MYR 0.87. The company’s robust expansion strategy, focus on high-margin surgeries, and potential in medical tourism position it as a compelling investment opportunity. While risks remain, the normalization of pre-operational costs and inclusion of new insurance panels are expected to drive earnings recovery in FY25, making Optimax a strong candidate for long-term growth.