HLIB Research remains upbeat about the performance of the eyewear retailer’s optical segment.
PETALING JAYA: Focus Point Holdings Bhd
’s earnings growth is set to get a boost from the expansion of its list of corporate clients and the reopening of China’s borders that could boost tourist numbers.
Hong Leong Investment Bank (HLIB) Research, thus, remains upbeat about the performance of the eyewear retailer’s optical segment, whose prospects are expected to be underpinned by brand equity and store expansion.
Focus Point is targeting to open 12 additional outlets in financial year 2023 (FY23). The group launched two new outlets in the first quarter of 2023 (1Q23).
“We understand from management that February sales eased after the Chinese New Year festive season, but March sales rebounded firmly. Encouragingly, corporate sales channel for the optical segment continued to grow healthily with active on-boarding of new customers.
“The expansion in the optical business will enable the group to bargain for higher rebates from its key suppliers who are mainly established foreign brands,” the research house said in a report yesterday.
Despite the drag from franchise sales (down by 9%) and eCommerce (down by 45%), Focus Point’s retail segment saw an increase of 16% year-on-year (y-o-y), while corporate sales were up by 60%.
HLIB Research noted that Focus Point had recently introduced a new optical franchise programme, FocusP Sightsavers, which aims to expand optical stores on street shop outlets outside of malls.
“With the lower set-up cost and option for installment, management targets this to entice franchisees while simultaneously increasing FocusP’s brand presence at more accessible street shop outlets,” the research house said.
Focus Point’s food and beverage (F&B) sales grew by 10% y-o-y on the back of improved retail sales (up by 16%) as a result of high footfall traffic, as well as corporate sales (up by 4%).
HLIB Research expects the increase in orders from new corporate clients to continue to spur sales momentum in the said segment.
“The group opened one F&B outlet in 1Q23 in street shop Komugi outlet in Kuchai Lama, Kuala Lumpur. The group also targets to open a flagship Komugi store in Shah Alam which will be the biggest one yet.
“Apart from supplying white-labelled products, the diversification includes supplying Komugi’s own frozen products at selected stores,” the research house said.
The entry of additional F&B workers in anticipation of the big orders from an undisclosed airline M led to losses (higher staff costs) in Focus Point’s F&B segment in 1Q23.
“Management expects to phase out the third-party foreign workers by 3Q23 upon the expiry of their contracts. We understand this will garner some cost savings from the absence of third-party agency fees and lesser overtime payments,” HLIB Research said.
The reopening of China’s borders will drive tourist momentum and is likely to benefit Focus Point. HLIB Research has maintained a “buy” call on Focus Point with a target price of RM1.20 a share based on an unchanged price-to-earnings ratio of 14 times of mid-FY24 earnings per share.
