Lower targets for Focus Point after weaker results

KUCHING: Bursa-listed optical solutions provider Focus Point Bhd (Focus Point) registered a core profit after tax ( PAT) of RM1.8 million for its first quarter of financial year 2020 (1QFY20), coming in below consensus expectations at 20.1 per cent of full year forecasts.

The research wing of Hong Leong Investment Bank Bhd ( HLIB Research) deemed this below expectations as it anticipated expect Focus Point to post weak earnings in 2Q instead.

“We deem this below expectations as we expect Focus Point to post weak earnings in 2Q20 due to optical stores being forced to temporarily close during the MCO period,” it said.

“The results shortfall mainly due to weaker than expected optometry sales.”

On a quarterly basis, Focus Point’s core PAT sank by 61.5 per cent in tandem with lower sales by 24.5 per cent due to seasonality in addition to weaker sales in the optical division from Covid -19 impact.

HLIB Research said the fourth quarter is typically a disproportionately strong quarter for Focus Point as the optical division receives rebates from major suppliers for meeting sales targets for the year.

Note that core PAT in 4Q18 and 4Q19 accounted for 62.7 and 47.7 per cents of full year earnings respectively.

“Overall, yearly sales weakened by 13.4 per cent was mainly due to lower optical division sales. Lesser sales in the optical division were due to MCO restrictions which resulted in the temporary closure of all of Focus Point’s optical retail stores from mid-March,” it saw.

“While its food and beverage ( F& B) division sales rose 4.4 per cent from increased corporate sales, division loss before tax widened to minus RM0.4 million from the closure of the group’s Komugi retail outlets during the MCO period.

“While we are positive on Focus Point’s pivot to ecommerce and cost savings from rental waivers and reduction in staff cost, we do not believe it will be sufficient to make up for the lost revenue from brick and mortar sales in 2Q20.”

Even before the Covid-19 outbreak and subsequent MCO, Focus Point had intended to close six or seven nonperforming stores.

With the occurrence of Covid19, HLIB Research reckoned that the number of store closures to be higher.

“Note that franchise operated stores incur their own labour and rent cost.

“Despite Focus Point sharing that they intend to provide support in this trying time, we still expect some of these stores to face cash flow issues,” it opined.

“All planned store openings in FY20 have been scraped for the time being; we had previously expected a net six increase in the number of optometry stores.”