MyNews earnings momentum to be sustained at current level
KUALA LUMPUR: Analysts expect the earnings momentum of MyNews Holdings Bhd (MyNews), previously Bison Consolidated Bhd (Bison), to be sustained at the current level.
MyNews’ financial year 2017 (FY17) net profit of RM24 million had come in within expectations of the research arm of Kenanga Investment Bank Bhd’s (Kenanga Research) and consensus at 95 per cent and 97 per cent, respectively.
According to Kenanga Research, looking ahead, earnings contribution for FY18 will be coming from the targeted opening of circa 90 new outlets, which is higher than 70 new outlets for FY17.
It noted that as of October 30, 2017, there were a total 356 outlets with additional 70 new MyNews outlets, three new MH Smith outlets and closure of eight underperforming outlets.
“Furthermore, expansion of the new outlets will be supported by the commissioning of its subDistribution Centre in Johor, which entails larger outlets opening opportunity in Johor and Melaka as well as improvement in delivery time, and costs savings,” Kenanga Research said.
“Nonetheless, we expect the earnings momentum to be sustained at the current level, pending the gestation period for its in-house food-processing facility, which is expected to be completed by end-current year 2018 (CY18), under its joint venture (JV) company, MyNews Kineya Sdn Bhd.”
Overall, Kenanga Research upgraded its target price to RM2.85 per share as the research arm changed its valuation base year to CY18E,from23-foldFY18Eearnings per share (EPS) previously.
The research arm’s current valuation was based on revised 26fold CY18E EPS which was in line with MyNews’ average regional peers.
Kenanga Research believed the 26-fold price earnings ratio (PER) is justified considering MyNews net profit growth averaging at 32 per cent per annum over the next two years.
“While we are long-term positive on Bison’s earnings growth prospect, its share price appears to be running ahead of fundamentals, which had appreciated 35 per cent since we upgraded our call to outperform,” the research arm said. Thus, Kenanga Research downgraded its recommendation from to market perform.