Focus Point Holdings: A Steady Earnings Machine With Undervalued Potential

Investors seeking steady earnings growth, reliable dividends, and a stock trading at a discount should take a close look at Focus Point Holdings Berhad (KLSE:FOCUSP). Over the past five years, this Malaysian healthcare company has delivered an astonishing 49% compound annual growth rate (CAGR) in earnings per share (EPS), driven by disciplined financial management and a focus on shareholder returns. While its shares have risen 53% since 2020, the stock remains undervalued at just 10.2x forward P/E, a stark contrast to its healthcare peers trading at 13.8x. Let's dive into why this could be a compelling buy for income-focused investors.

The EPS Growth Story: A Conservative Play That Delivers

Focus Point's 49% EPS CAGR since 2020 is the bedrock of its appeal. While the company's 2024 EPS of RM0.072 missed analyst estimates by 8.2%, the broader trend remains intact. Here's the breakdown:
- 2020 EPS: RM0.048
- 2021 EPS: RM0.043 (a slight dip due to pandemic pressures)
- 2022 EPS: RM0.11 (a 158% jump as operations normalized post-pandemic)
- 2023 EPS: RM0.065 (a strategic reset to prioritize cash flow)
- 2024 EPS: RM0.072 (a 10.7% rebound from 2023 lows).

The volatility highlights Focus Point's conservative earnings management, where it avoids aggressive accounting to maintain long-term credibility. This approach has kept the company's profit margins stable at 11%, a rare feat in a competitive healthcare sector.

Dividends: A Steady Income Stream

While EPS growth is impressive, the 928% total returns since 2020 (combining capital gains and dividends) make Focus Point a standout income play. The company has maintained a dividend payout ratio of ~25%, far below its capacity, ensuring sustainability. For example:
- 2024 Dividend: RM0.018 per share (a 4.7% dividend yield at current prices).
- Dividend Growth: From RM0.01 in 2020 to RM0.018 in 2024, signaling a commitment to shareholders.

This dividend discipline, paired with a low debt-to-equity ratio (0.3x), paints Focus Point as a financially robust, low-risk investment.

Why It's Still a Buy: Valuation and Analysts' Outlook

Despite the 53% share price rise since 2020, Focus Point trades at a 20% discount to its healthcare peers. Here's why it's undervalued:
- P/E Ratio: 10.2x vs. sector average of 13.8x.
- Analyst Forecasts: A 10% annual EPS growth rate over the next three years, supported by its 8% revenue growth trajectory and a 11% profit margin floor.

Risks and Considerations

No investment is without risks. Focus Point faces sector-specific challenges, including regulatory changes and rising input costs. However, its diversified healthcare portfolio—spanning medical supplies, diagnostics, and pharmaceuticals—buffers against single-sector downturns. Additionally, the 2024 EPS miss underscores the need for cautious optimism, but it's a blip in a longer-term upward trend.

Final Take: A Buy for Income Investors

Focus Point Holdings offers a rare combination: sustained earnings growth, reliable dividends, and a discounted valuation. With analysts projecting 10% EPS growth annually, the stock's current price of RM0.745 represents a 53% total return opportunity over five years, assuming the P/E ratio normalizes to 12x.

Action to Take: Buy FOCUSP for a 5–7 year hold, targeting a 15x P/E multiple (RM1.08 per share) and compounding dividends. This is a “set it and forget it” stock for income-focused portfolios.

In a market obsessed with high-risk, high-reward bets, Focus Point's steady-as-she-goes approach is a reminder that patience and discipline still win.