Mynews Holdings Bhd
Buy. Target price: RM0.62
BASED on MNHB’s 2023 annual report, the group has greatly improved on its sustainability disclosures within the quantitative environmental (‘E’) category, particularly for scope 1, 2 & 3 carbon emissions. Once a trend is established through consistent annual disclosures, investors will be able to better track and monitor the group’s ESG progress.
MNHB has published key areas to address under individual environment, social and governance pillars. However, concrete ESG targets remain absent in its latest sustainability statement. Note that its convenience store peers have not committed to long-term ESG targets as well.
Our expectations for MNHB’s FY24E earnings turnaround is premised on narrowed losses for both its CU stores and food processing centre. The group’s focus on ramping up fresh food SKUs to existing Mynews stores could also gradually drive gross profit margin upwards, in tandem with MNHB’s new store opening target (+100 stores in FY24E). Our earnings estimates are unchanged.
The ESG pressure faced by convenience stores in general mainly emanates from their usage of single-use plastic bags and other plastic materials in food product packaging. Positively, enhanced Government regulations have led to a decline in MNHB’s overall plastic usage per retail transaction, and lower biodegradable plastic uses in its food product packaging, especially ones that are manufactured in-house.
Food wastage is another area that requires attention given MNHB’s foray into food manufacturing in 2019. Unsold third-party supplied food products are returnable but the group has yet to determine sustainable means of disposing its in-house manufactured food products at this juncture.
Maintain BUY with an unchanged TP of RM0.62.