MyNews could face margins pressure from new outlets

KUALA LUMPUR: While poised to benefit from further reopening of the economy, MyNews Holdings Bhd's margins could be under pressure in the coming quarters due to higher depreciation and marketing expenses at its new outlets.

In a report, Kenanga Research noted that the group's 1QFY22 net loss of RM8.8il disappointed expectations as the higher opex weighed on the bottomline despite the higher revenue on the opening of new stores and higher footfall.

"1QFY22 net loss of RM8.8m came below our and street’s net profit estimates of RM19.9m and RM19.4m, respectively," said the research firm.

Post-results, Kenanga slashed FY22 earnings by 16% to RM16.7mil, accounting for higher opex for the new outlet launches, but maintained FY22 estimates.

It maintained its "outperform" recommendation with a lower target price of 85 sen.

On outlook, Kenanga said it remained positive on the expansion plans, especially given the country's transition to an endemic phase on April 1.

"On further reopening of the economy, we are positive on its outlook on the back of the increase in the number of openings of its CU stores which will increase its utilisation for the FPC (guestimate of the current utilisation rate is 40-45%), increasing number of myNEWS SUPER VALUE and myNEWS CVs stores, and expansion of its eCommerce order delivery services.

"Notably, set-up costs for CUs are generally lower than myNews stores (RM360k-RM450k vs. myNews’

RM400-450k) due to cheaper fresh food equipment," it said.