RHB Research said Focus Point is likely to have an earnings turnaround in the near term.
PETALING JAYA: Focus Point Holdings Bhd
is expected to benefit from a more stable outlook for its food and beverage (F&B) segment, with solid expansion plans in place and years of useful expertise under its belt, says RHB Research.
The research house noted that due to the group’s established network and market leadership, it will also be able to benefit from the growing number of people needing glasses.
Having fully resolved the primary drag of having excess manpower in September 2022, RHB Research said Focus Point incurred a pre-tax loss of RM1.2mil for the nine months of 2023 but is likely to have an earnings turnaround in the near term.
In a report on Focus Point, RHB Research said the group intends to grow its F&B segment by opening three to four more Komugi bakery outlets in the financial year 2024 (FY24), as well as attract more corporate clients to fully utilise its central kitchen, which has a utilisation rate of 70% at present.
On top of that, Focus Point plans to introduce a frozen-yoghurt brand in light of the product’s potential profitability and rising demand.
Focus Point’s eyewear business is expected to benefit from the local eyewear market’s accelerating five-year compound annual growth rate of 6.6%.
RHB Research said the forecast growth is due to the increased screen time among people, leading to vision issues, and growing population with presbyopia due to ageing.
“We believe this opportunity will be well captured by Focus Point considering its market-leading position with an extensive store network of 189 outlets as of the third quarter of 2023 and various store formats to cater to consumers from different income groups,” it added.
RHB Research said the business segment has constantly shown steady growth and superior profitability, with the group making a net margin of about 15% in FY22 compared to the peer average of 10%.
Focus Point plans to open 20 new outlets in FY24, including 10 franchised stores, which supports RHB Research’s forecast of 12% and 11% growth in segmental revenue and pre-tax profit, respectively.
RHB Research forecast a five-year compound annual growth rate of 30% for Focus Point to RM40.2mil in FY25, driven by steady demand for optical and F&B products, outlet expansion, healthy same-store sales growth and market share gains.
The research house has a “buy” call on Focus Point with a discounted cash flow-derived target price (TP) of RM1.02 per share, which offers an upside of 48% and a yield of about 6%.
The research house said its TP of RM1.02 implies a 13.5 times FY24 price-to-earnings ratio, in line with comparable companies.
“This is justified by its market leadership position, structural growth in the eyewear industry and above-industry margins and return on equity.
“We apply a 4% discount to reach our TP, based on its environmental, social and governance score of 2.8,” it added.
