KUALA LUMPUR: The worst is over for MyNews Holdings Bhd, say analysts, as the convenience retail chain operator is expected to see improved results from its business units while forging ahead with a 100-outlet expansion plan in FY24.
In a filing with Bursa Malaysia yesterday, MyNews posted a core net profit of RM1.8mil in 1QFY24, which excluded exceptional items of RM500,000 for mainly property, plant and equipment write-off costs.
According to CIMB Securities Research, the bottomline came within its estimates and marked a second consecutive quarter of profitability for MyNews.
It attributed the performance to disciplined cost management, continuous enhancement in product offerings and narrowing losses from the food processing centre (FPC) due to higher fresh food sales.
In plans moving forward, MyNews aims to ramp up new store expansion in FY24 across its five retail brands, namely Mynews, CY, WHSmith, Supervalue and Maru Coffee.
CIMB Securities also noted that MyNews shared in its 4QFY23 briefing that it aims to open 100 new stores in FY24 - as compared to about 10 net store additions in FY23 - with the majority under the more profitable Mynews brand.
Getting behind the stock for its improved earnings prospects, the research firm upgraded its call on MyNews to "hold" from "sell" with a higher target price of 49 sen.
"Our target price is now based on 16.4x 2025F price-earnings (PE) (we switched from our valuation approach of 1.3x price-book value of FY24F to reflect its improved earnings prospects).
"The 16.4x PE is at a 30% discount of 7-Eleven’s five-year forward mean PE of 23.4x," it said.
CIMB Securities added that the discount is to account for Mynews’ weaker earnings track record, smaller store footprint and lingering earnings risks from its recent turnaround efforts.
In its own company update, RHB Research, which has a "buy" call on MyNews, shared the view that the group's earnings is on the mend.
The research firm said it expects the CU stores to stay the course to a turnaround in FY24 while the Mynews brand could further offset narrowing losses from other business units.
"The focus on expanding the Mynews brand will be the key driver for sustainable profitability, aiming to offset losses from other units given its consistent track record of strong and stable performance.
"We believe the expansion will be further aided by the new shareholder providing valuable insight and suggestions on the business."
The CU business, meanwhile, is adopting a more prudent approach in marketing investment and optimising maintenance expenses to downsize losses while fine-tuning its offerings to boosts sales, it said.
It added that MyNews' FPC capacity utilisation and sales are anticipated to improve, driven by increased retail sales volume alongside the opening of new stores.
RHB maintained its earnings forecasts and discounted cash flow-derived target price of 68 sen a share, following MyNews' results announcement that came in line with its expectations.
