Mynews Holdings Bhd
Buy. Target price: RM0.68
CORE profit of RM1.8 million (+164.7% QoQ, Q1’23: -RM3.1 million) met only 14-18% of our consensus forecasts but we anticipate stronger earnings ahead on the improvement in all business units. Note that we adjusted for property, plant & equipment (PPE) written off and loss on disposal of PPE amounting to RM0.5 million to arrive at the core profit.
YoY, Q1’24 revenue rose 6.2% to RM195.5 million, thanks to improvements in overall in-store sales, despite minimal net store openings (+1 to a total of 597 stores). Q1’24 GPM expanded 3ppts to 36.8%, thanks to improvement in sales mix and the higher margin of CU business. QoQ, Q1’24 sales rose 5% due to increased business volume during year-end festivities. Meanwhile, food processing centre (FPC) losses narrowed to nearly breakeven levels at -RM0.2 million due to an improved utilisation rate. Consequently, Q1’24 core earnings rose 164.7% QoQ to RM1.8 million.
Mynews will ramp up its outlet expansions, targeting to open >100 new stores (70% Mynews, 30% CU) in FY24. The focus on expanding the Mynews brand will be the key driver for sustainable profitability, aiming to offset losses from other units given its consistent track record of strong and stable performance. We believe the expansion will be further aided by the new shareholder providing valuable insight and suggestions on the business. Meanwhile, CU is adopting a more prudent approach in marketing investments and optimising maintenance expenses to downsize losses while fine tuning its offerings to boost sales. On the other hand, FPC’s capacity utilisation and sales are anticipated to improve, driven by increased retail sales volume alongside the opening of new stores.
Keep BUY and RM0.68 TP, 30% upside.