By ANIS HAZIM / Pic TMR
ANALYSTS continue to like MyNews Holdings Bhd as a cyclical recovery play despite its financial year 2021 (FY21) core loss of RM43.1 million.
RHB Research’s analysts Soong Wei Siang and Raja Nur Aqilah Raja Ali stated that MyNews is an attractive proxy to the economic recovery theme post-pandemic.
They noted that the company is expected to benefit from the full-fledged and sustained reopening of the economy next year.
“We remain upbeat on its stores’ aggressive expansion plans, with its scalability and synergistic benefits expected to underpin earnings growth in the medium to long term,” the analysts said in a note yesterday.
MyNews reported a core loss of RM8.9 million in the fourth quarter of 2021 (4Q21), bringing its cumulative loss for FY21 to RM43.1 million.
The retail group, however, missed the consensus’ estimates of RM31.5 million core loss for FY21 but it was broadly in line with RHB’s projection of a RM40 million loss for the year.
“The negative deviation was due to the lockdown-induced business disruptions that lasted between May to September 2021, as well as the softer retail performance from a lack of foot traffic,” the analyst noted in a report on MyNews yesterday.
MyNews’ 4Q21 revenue was 10.7% higher as movement restrictions were eased in September, leading to an improvement in sales.
Consequently, 4Q21 core loss narrowed to RM8.9 million from RM14.9 million in the previous quarter of the same year.
For year-on-year (YoY), FY21 revenue was lower by 18.2% due to the drawn-out lockdown between May to September which weakened retail sales, while gross margin dropped to 30.5% versus 32.7% in FY20, likely due to an unfavourable product mix.
Its food processing centre (FPC) also recorded narrower 4Q21 losses of RM3.47 million from RM3.66 million in 3Q21 and is expected to turn around by the end of FY22.
The analysts noted retail sales have only seen a mild improvement for the quarter due to the gradual relaxation in movement restrictions.
“We believe the prospects of a sustained recovery have yet to translate to a full-fledged recovery in foot traffic and sales performance for MyNews.
“With the expectation of a return in office crowds and the reopening of international borders in the second half of 2022, we can expect earnings recovery to be much stronger in FY22 as most MyNews stores are located in the Klang Valley,” they wrote.
They added MyNews ‘CU’ brand should underpin the group’s earnings growth in the medium to long term corroborated by its aggressive expansion plans of over 40 outlets.
“Considering the brand’s positive reception, we do not rule out the possibility of a shorter gestation period and positive contribution to earnings,” they added.
The analysts made no changes to their MyNews earnings forecast and maintained a “Buy” call pending its analyst’s briefing.
“Our environmental, social and governance score of 3.1 for MyNews warrants a 2% premium. Our discounted cashflow-derived RM1.22 target price (TP) is unchanged, implying 29 times of FY22 forecast price-earnings, which is around its five-year mean,” they further said.
The analysts noted this is a slight discount to 7-Eleven Malaysia Sdn Bhd’s ‘Buy’ call with RM1.85 TP and a valuation of 31 times FY22F P/E.
Risks to the stock could be in the form of an extension of the blanket Movement Control Order in the face of stubbornly high Covid-19 cases, and a major delay in the national Covid-19 vaccination programme.