Post-results, the research house cut its FY20 earnings estimate on the company to a core loss of RM9.5mil from core PATAMI of RM5.1mil.
It maintained its "underperform" recommendation on the counter and target price of 48 sen based on 18x FY21 forecast earnings per share.
While the research house expects a better FY21 on some degree of recovery post-movement control order (MCO) period, it expects MyNews' efforts to grow market share to be continually challenged by competitors, especially from newcomers with innovative fresh products.
"In view of the uncertainties in the economic landscape due to the pandemic, MyNews is taking a cautious approach in moving forward with continuous efforts placed to increase efficiencies and optimise costs and aligning its business strategies to the “new normal”,
repositioning itself to stay competitive and agile in facing the uncertainties," said Kenanga.
For the first nine months of its financial year, MyNews recorded a core loss of RM4.1mil compared to a core profit of RM23.7mil in the previous corresponding period.
This was below Kenanga's and consensus expectations, which had pegged profit at RM5.1mil and RM9.9mil respectively.
MyNews' performance was negatively impacted by the temporary closure of 30% of outlets at selected outlets at selected locations in 1HFY20 and a decrease in daily sales at outlets due to the MCO and subsequent RMCO.
In addition, the food processing centre recorded higher operating costs leading to a loss of RM8mil due to the fluctuation in sales.
Gross profit margin contracted 2.7ppts to 33% from 35.7% in the period due to the change in sales mix to lower-margin products and price discounts to drive sales of in-house ready-to-eat food.
However, the slower decline in sales was supported by a higher store base of 531 stores versus 472 stores in the same period last year.
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