Optimax Holdings Berhad (“Optimax”) (KLSE: OPTIMAX) made its debut on the ACE Market of Bursa Malaysia on 18 August 2020. At the time of writing, shares of the company are trading at RM0.76, which is at a premium of 153.3% from its initial public offering (IPO) price of RM0.30. If you are looking at Optimax with interest, here are 10 things to know before you invest.  

1. History and background

Optimax provides eye specialist services through a chain of specialist centres operating under the name of “Optimax”.  The company has a network of 13 specialist centres in Malaysia, comprising 1 specialist hospital, 11 ambulatory care centres and 1 specialist clinic that are wholly-owned or jointly owned with resident eye surgeons. The specialist centres are located in the Northern region (Ipoh and George Town), Central region (Klang, Seremban, Seri Petaling, Shah Alam, Bandar Sunway and Taman Tun Dr Ismail (TTDI)), Southern region (Kluang, Muar, Segamat and Johor Bahru) and East Malaysia (Kuching).

(Source: IPO prospectus)

2.  Business activities and revenue stream 

Optimax has accumulated a track record of approximately 25 years of experience in providing eye specialist services since the commencement of its first specialist centre in TTDI in 1995. Broadly, its services can be categorised into four major groups as follows:

  • Refractive surgery comprising laser vision correction and implant vision correction;
  • Treatment of eye diseases and disorders including cataract surgery and other eye medical treatment;
  • Consultation and dispensary services comprising doctor consultation and medication; and 
  • Oculoplastic surgery.

The diagram below provides the breakdown of the company’s revenue by types of eye specialist services from 2016 to 2019. Refractive surgery and treatment of eye diseases and disorders comprise the bulk of the company’s revenue in 2019 at 79.4%.

(Source: IPO prospectus)

To complement its core services, the company also provides related services which mainly comprise eye examinations. They include sales of optical wear, consumables from surgery and medical treatments, procedures (mainly Ortho-K, which is a non-surgical method of reshaping the cornea to provide clearer vision for children, and Botox), administration fees, as well as laboratory tests for patients. All eye examinations are performed by the company’s in-house optometrists. 

3. Geographic markets served 

Optimax mainly serves the Peninsular Malaysia market. East Malaysia accounted for less than 10% of the company’s total revenue. The diagram below provides the breakdown of the company’s revenue by location from 2016 to 2019. 

(Source: IPO prospectus)

4. Mode of operations 

Optimax adopts two approaches in its business operations as follows:

  • Through fully owned ambulatory care centres where the company will hire employee doctors to be its resident doctors.
  • Through business associate arrangements with jointly new ambulatory care centres where the company’s resident doctors will have equity participation and be minority shareholders. This approach allows Optimax to attract resident eye specialist doctors to join the company, as well as incentivize them to perform.

At present, Optimax has 18 surgeons to perform a range of eye specialist services from diagnosis to treatment including medical and surgical procedures. These surgeons are supported by a team of professional workforce of 33 optometrists to perform eye examinations. 

Eye surgeons are medically qualified doctors with ophthalmologist degrees to provide medical and surgical care pertaining to eye diseases, disorders and injuries. The eye surgeons are licensed as medical practitioners by the Malaysian Medical Council as well as registered as a specialist in ophthalmology under the National Specialist Register in Malaysia. 

5. Use of IPO proceeds and future plans

Optimax plans to use 49.3% or RM10.4 million of the RM21.0 million proceeds raised through the IPO for capital expenditure, 16.8% or RM3.5 million for repayment of borrowings, another 16.8% or RM3.5 million for working capital and 17.1% or RM3.6 million for listing expenses.

(Source: IPO prospectus)

Optimax’s overall business strategy is as follows:

  • The company plans to expand its network of ambulatory care centres in Malaysia; and
  • It also intends to upgrade and convert the specialist clinic in Seremban into an ambulatory care centre which will enable the company to carry out surgical procedures such as refractive and cataract surgeries. 

As part of its expansion plans, the company will also upgrade its existing specialist centres with new ophthalmological equipment and tools to increase its service offering and/ or expand its capacity. 

6. Industry indicators

The number of registered cataract surgeries performed in Malaysia is one of the indicators of demand for eye specialist services. 

Vital Factor Consulting estimates that between 2014 and 2018, the total number of cataract surgeries performed registered with the Cataract Surgery Registry (CSR) of Malaysia has been growing at a compound annual growth rate (CAGR) of 8.3%. Cataract surgeries performed on an outpatient basis are great at a faster rate compared to the total number of cataract surgeries, indicating a growing trend towards outpatient services. 

(Source: IPO prospectus)

Some contributory factors to demand for eye specialist services including the following:

  • Aging population;
  • Prevalence of lifestyle diseases;
  • Growing affluence of the population; and
  • Increase in healthcare tourism 

7. Competitive landscape

The number of operators and facilities for eye specialist services contributes to the competitive landscape. The estimated number of private hospitals and ambulatory care centres that provide ophthalmology surgical services in Malaysia as at end of 2019 are as follows:

(Source: IPO prospectus)

As only registered ophthalmologists are allowed to provide medical and surgical eye specialist services, growth of operators and the number of their facilities are dependent on their ability to secure and retain ophthalmologists for their business operations. As at 22 June 2020, there were 626 ophthalmologists registered with the Ministry of Health. As a point of reference, Optimax has a team of 18 eye surgeons (roughly 2.9% of total registered ophthalmologists). 

8. Key directors and substantial shareholders 

Dato’ Tan Boon Hock is the founder and Non-Independent Non-Executive Director of Optimax.  In his role, Dato’ Tan provides business and management guidance and strategic advice to the senior management of the company. He is the largest shareholder of Optimax with an equity stake of more than 61.0% upon listing. The shares are held by him directly and indirectly through an investment company, Sena Healthcare Services which he owns with his wife, Datin Lim Sho Hoo.  

Apart from Optimax, Dato’ Tan has established various other businesses involved in healthcare services. In 2008, he established Hospital Pakar Mata Melaka Sdn Bhd which is involved in investment holding and construction of hospitals. He established Sena Wellness Sdn Bhd in 2010 which operates a general practitioner private clinic to provide medical and healthcare consultancy.  

Dato’s Tan’s daughters, Ms. Sandy Tan and Ms. Michelle Tan serve Optimax in the capacity of Non-Independent Executive Director and Chief Executive Officer, and Chief Financial Officer respectively. They each own a 0.38% equity stake in the company upon listing. 

Dr. Stephen Chung serves Optimax as a Senior Medical Director and is a substantial shareholder with an equity stake of close to 5.7% in the company. He obtained his Bachelor of Medicine and Bachelor of Surgery from University of Mysore, India in 1984 and his Master of Surgery in Ophthalmology from National University of Malaysia in 1993. 

Dr. Chung is mainly stationed at the company’s eye specialist centre located at TTDI and further provides his services at the eye specialist centres in Kuching and Ipoh on an as-needed basis by performing refractive surgeries. Dr. Stephen Chung is also primarily responsible for providing refractive surgeries training to the company’s doctors. In addition, he is the Chairman of Optimax’s Medical Committee, which is primarily responsible for introducing rules and standard operating procedures to be adopted by the company’s specialist hospital, ambulatory care centres and clinics and applied by its doctors. 

9.  Financial Highlights 

Financial Year End 
2016201720182019
RM’000RM’000RM’000RM’000
Revenue 29.96236,01549,23462,619
Profit after tax3,1357,3804,9708,739
Profit after tax margin (%)10.4620.4910.0913.96
Cash and cash equivalents2,8013,2025,5348,519
Loans and borrowings2,9273,6132,0424,082

(Source: IPO prospectus)Optimax is a growing and profitable company. Its revenue and profits have been growing at CAGR of 27.9% and 40.7% respectively over 2016 to 2019. Meanwhile, its net margins have been consistently above 10.0% over the same period. The company should not have any liquidity issues, since it has a net cash position of RM4.4 million in 2019. Presently, it does not have any fixed dividend policy in place. 

10. Current stock price is fairly valued  

Currently, Optimax is trading at a price to earnings (PE) ratio of 31.9, with a market capitalisation of RM206.6 million. At this valuation, the stock looks fairly valued since it is in line with the company’s historical growth rates in revenue and net profits. While it is a properly managed company, investors may wish to monitor the company’s developments for some time before considering an investment as it is a newly listed company with limited trading history.  

(Source: Google Finance)

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