CGSI Research said the loss of earnings contribution from the Caring Pharmacy disposal is offset by improving convenience store prospects.
PETALING JAYA: CGS International (CGSI) Research is cautiously optimistic about 7-Eleven Malaysia Holdings Bhd
’s outlook as it expects consumption and tourism growth to boost convenience stores.
The research house estimated the real gross domestic product growth at 4.6% year-on-year and private consumption at 6.5% for this year.
It said the increased cash handouts to lower income groups should also support consumer spending.
The handouts included a higher maximum rate for the Rahmah Cash Aid from RM3,100 to RM3,700 in 2024, the one-off bonus to civil servants and pensioners, along with cash transfers of an extra RM2bil.
“A further recovery in tourist arrivals could lead to increased footfall and support demand for convenience store goods,” CGSI Research added.
The research house noted that the conversions of convenience stores to “7-Cafes” and completion of its fresh food commissary should complement improved economic activity and tourist boost in footfall.
It reiterated its “hold” rating on the stock with a target price of RM1.98.
“We think the loss of earnings contribution arising from the Caring Pharmacy disposal is offset by improving convenience store prospects,” it added.
The research house noted that its forecasts for 7-Eleven are based on the post announcement of the group’s fourth quarter results for the financial year ended Dec 31, 2023 and its completion of the disposal of Caring Pharmacy.
It said the disposal of Caring Pharmacy would provide focus on further growth to 7-Eleven. Core net profit estimates for the company for its financial years 2024 (FY24) and FY25 are cut by 28.5% and 19% respectively.
