KUALA LUMPUR (Dec 22): The return to profitability of MyNews Holdings Bhd for the fourth quarter ended Oct 31 (4QFY2023) has prompted analysts to revise their earnings forecast and recommendation for the convenience store operator.
Maybank Investment Bank Research (Maybank IB) has upgraded its recommendation on MyNews to “buy” from “hold” and raised its target price to 62 sen (from 54 sen).
The research house raised its earnings estimates for the group in FY2024 to FY2025 by 32% to 83%, to reflect the current store operating run rates and potential cost savings from the food processing centre (FPC) and CU convenience-store chain.
“Although consumer spending trends remain subdued, group earnings are expected to be driven by narrowing FPC losses and expectations for CU stores to break-even within the next 6 months. MyNews also plans to open more than 100 stores in FY2024 with the bulk of new store openings to be under its MyNews brand,” Maybank IB said.
The research house also introduced its FY2026 earnings estimates and maintained its valuation peg of 1.7 times FY2024 price-to-book value (PBV), which is one standard deviation below its mean.
Likewise, RHB Investment Bank (RHB IB) also upgraded its rating on MyNews to “buy” from “neutral” with a higher target price of 68 sen (from 54 sen).
The research house raised its earnings forecasts for the group by 4% for FY2024 and 14% FY2025, while introducing FY2026 earnings projection of RM36 million.
RHB IB said it believes the worst is over for MyNews and expects a sustainable turnaround, supported by enhanced operational efficiencies, strategic expansion and the emergence of a new major shareholder that could offer valuable insights for the business.
“Further ahead, a more significant earnings turnaround could materialise with MyNews’ expansion strategy, which aims to open more 100 new stores (70% myNews, 30% CU). According to management, the strong performance of the myNews unit is poised to offset the losses from its other businesses.” RHB IB added.
Earlier, MyNews posted a net profit of RM947,000 million in 4QFY2023, compared with a net loss of RM82,000 in 4QFY22, thanks to higher gross profit margin and lower losses from its FPC.
The company’s revenue grew 3.08% year-on-year (y-o-y) to RM186.2 million in 4QFY2023, driven by contribution of its new stores (six new stores y-o-y) and improvement in overall in-store sales.
At the time of writing on Friday, shares in MyNews traded higher half a sen or 0.97% to 52 sen, giving it a market capitalisation of RM386.43 million.