MyNews 1H results met expectations, retains ‘Buy’ at 81 sen

MYNEWS Holdings Bhd has retained ‘Buy’ call with a 52-week target price (TP) of 81 sen at a local institutional research house after its first half (1H) results met expectations, with the second quarter ended April 30, 2024 (2Q24), core earnings showing quarter-on-quarter improvement despite softer seasonality during the fasting month.

In a report released today, RHB Investment Bank Bhd (RHB Research) said the consolidation of the South Korean convenience store CU and Mynews management teams has consistently improved sales and gross profit margin through stronger bargaining power and an enhanced product assortment.

“We believe valuation should re-rate with the progressive contributions from Mynews, alongside the turnaround of CU and food processing centre, driving the recovery of the profit base to pre-pandemic levels,” it said, retaining the ‘Buy’ call at the same target price.

Mynews has four ‘Buy’, one ‘Hold’ and three ‘Sell’ calls among the analysts tracked by Bloomberg, with a consensus TP of 69 sen. The counter was trading at 66.5 sen at 10.30am, after closing closing at a 52-week high of 67.5 sen on June 14.

The report said it anticipated 2H24 earnings to show a more significant turnaround, driven by CU’s narrowing losses.

For the first six months through April 2024, Mynews posted a net profit of RM3 million on a revenue of RM388.3 million compared to a net loss of RM9.5 million on a revenue of RM358.3 million in the same period last year.

In the report, RHB Research said it anticipated CU’s losses will continue narrowing and reach breakeven by end-FY24, thanks to the consolidation of CU and Mynews management teams, which has yielded synergistic benefits resulting in stronger bargaining power and an improved product assortment.

“This should propel group profits to pre-pandemic levels once CU is no longer a drag on earnings,” it said.

It also noted that Mynews has demonstrated consistency and strong earnings delivery, and believed the focus on expanding the brand will be the key driver for sustainable profitability moving forward.

Mynews is now operating a total of 622 outlets, made up of 471 myNEWS (including 34 Supervalue), 131 CU and 20 WHSmith outlets.

In its exchange filing, Mynews said opening of new stores is ongoing while the existing stores are being improve and revamp when and where necessary.

“While it is undeniable that this market segment is becoming more crowded and competition is more intense, the group believes that with its experience, agility and flexibility, there is still room to grow its brands. It will spare no effort in enlarging its store network while improving the financial performance,” it said. TMR