Analysts excited over upcoming completion of Mynews’ FPC
KUCHING: Analysts are excited over the upcoming completion of Mynews Holdings Bhd’s ( Mynews) food processing centre which is expected to be completed by the first half of current year 2019 (1HCY19).
According to AmInvestment Bank Bhd (AmInvestment Bank), the FPC, which has the capacity for distribution of ready-to- eat ( RTE) and bakery products to 600 stores.
“We are excited over the upcoming completion of the FPC, however we believe the initial gestation period would take at least one year,” the research firm said.
However, AmInvestment Bank believed that in the long run, MyNews’ gross profit margin would improve underpinned by a higher margin contribution by the incoming fresh food segment.
Looking ahead, the research firm maintained its gross profit margin estimates of 37 per cent and 38 per cent for financial year 2019 forecast ( FY19F) and FY20F, respectively.
On expansion plans, the research arm of Kenanga Investment Bank Bhd ( Kenanga Research) noted that MyNews plans to open circa 70 new outlets in FY19, which is lower than the 90 new outlets addition in FY18.
Nonetheless, Kenanga Research expected earnings margin to be limited by higher staff and rental costs during this expansionary period.
The research arm also expected limitations to come from start-up costs from the commissioning of in- house food- processing facility, which is expected to be fully completed by January 2019, supported by Mynews’ joint venture (JV) companies, MyNews Kineya Sdn Bhd and MyNews Ryoyupan Sdn Bhd.
“We like Mynews for its aggressive store expansion plans and franchise opportunities arising from the full autonomy of its myNews.com brand name,” AmInvestment Bank remarked.
However, the research firm did note on the key risks to Mynews which included restrictions on supply of foreign labour (this makes up circa 32 per cent of Mynews’ workers) and delay in the completion of the group’s FPC.