MyNews’ topline growth to be sustained by 90 new stores in FY18F but earnings margin to be eroded
KUCHING: MyNews Holdings Bhd’s (Mynews) topline growth has been projected to be sustained by an expansion of 90 new stores in financial year 2018 forecast (FY18F) but earnings margin will be eroded from staff, rental and start-up costs.
In its outlook on MyNews, AmInvestment Bank Bhd (AmInvestment Bank) projected that topline growth will be sustained by an expansion of 90 new stores in FY18F
The research firm noted that this would bring the group’s store count to 446 in FY18F versus 356 in FY17.
“While we are excited over the completion of the group’s food processing facility in FY19F, there may be start-up costs, which would affect profitability.
“However in the long run, its gross profit margin should improve, underpinned by a higher margin contribution by the oncoming fresh food segment.
“We expect MyNews’ gross profit margin to improve from 37 per cent in FY19F to 38 per cent in FY20F,” AmInvestment Bank said.
Th research arm of Kenanga Investment Bank Bhd (Kenanga Research) also highlighted on this, expecting earnings margin to be eroded by higher staff and rental costs during this expansionary period as well as start-up costs from the commissioning of inhouse food-processing facility.
It noted that the in-house foodprocessing facility is expected to be completed by end-current year 2018 (CY18), supported by MyNews’ joint venture ( JV) companies, MyNews Kineya Sdn Bhd and MyNews Ryoyupan Sdn Bhd.
“Additionally, with higher tobacco prices following implementation of the new Sales and Service Tax (SST), we expect slower sales for MyNews as the group’s three major suppliers are tobacco players (New Foo Hing Sdn Bhd (BAT products), Lein Hing Enterprise (PMI products), and CSS Tobacco (JTI products)), which make up circa 40 per cent of the group’s total purchases and circa 33 per cent of total revenue,” Kenanga Research said.
According to MyNews’ latest financial report, the group’s gross profit margin was 38.1 per cent and profit before tax was RM24.9 million for the period ended July 31, 2018, compared to the corresponding period of 2017 of 37.1 per cent and RM23.64 million respectively.