PETALING JAYA: Eco-Shop Marketing Bhd
is heading into its first quarter of financial year 2027 (1Q27) with signs of improvement in same-store sales growth (SSSG), while continued store expansion is expected to remain the main driver of earnings.
The dollar-store retail chain had reported its highest-ever quarterly net profit of RM72.63mil for 4Q26 as revenue also rose to a record high, on improved margins and store expansion.
In a note to clients, UOB Kay Hian (UOBKH) Research said Eco-Shop’s SSSG may have reached an inflection point, with the upcoming quarter unlikely to see the significant contractions recorded previously.
“We expect 1Q27 results to be robust, underpinned by the improving SSSG as well as its pipeline of new store openings.
“Following an additional 17 new store openings, the total store count has now surpassed 400 with its financial year 2027 (FY27) target of 100 new store openings remaining intact,” the research house said.
It expects earnings growth to remain largely driven by store expansion, with SSSG forecast to improve only modestly by 1% to 2% in FY27 and FY28.
“We view the improving SSSG as a positive sign,” UOBKH Research said.
Budget 2027 could provide another catalyst, although its impact on Eco-Shop is likely to be mixed. Higher cash handouts under MySara/MyKasih could support consumer spending, with Eco-Shop also expanding MyKasih acceptance across its stores.
It has secured 97 additional terminals, bringing its total to 256, or about 55% of its existing stores.
At the same time, a potential minimum wage increase could raise costs, with about 60% of Eco-Shop’s workforce estimated to be earning the minimum wage.
While implementation is likely only in 2028, the group may eventually need to raise average selling prices (ASP), although weaker consumer sentiment could make passing on higher costs more challenging.
The research house said competition from Chinese eCommerce player Pinduoduo has also put pressure on some retailers, particularly through aggressive pricing and free-delivery promotions.
UOBKH Research maintained its “buy” call on Eco-Shop with an unchanged target price of RM1.70, citing the retailer’s attractive three-year profit compound annual growth rate of 17.2%, driven by continued store expansion.
It said the recent improvement in SSSG suggests that downside risks to SSSG are becoming more limited.
“We value Eco-Shop at 31.0 times 2027 price-to-earnings, down from 34.5 times, at a discount to our valuation for 99 Speed Mart Retail Holdings Bhd (99 Speed Mart) at 38.9 times but more closely aligned with MR DIY Group (M) Bhd at 30.0 times, given Eco-Shop’s more moderate earnings growth since its listing,” UOBKH Research said.
“Furthermore, 99 Speed Mart deserves a valuation premium given its index-linked status, resilient underlying demand reflected by its SSSG and superior capital efficiency.”
An analyst told StarBiz that consumers are increasingly prioritising essentials such as food as weaker confidence weighs on discretionary spending.
He noted that Eco-Shop’s relatively low ASPs and smaller basket sizes offer some protection against these pressures, although the retailer will need to continue managing costs carefully amid rising operating expenses.
