This article first appeared in The Edge Malaysia Weekly on January 22, 2024 - January 28, 2024

MyNews Holdings Bhd is back to its pre-pandemic busyness as consumers return to stores three years after the Covid-19 outbreak.

With retail footfall and consumption figures continuing to recover, the retail convenience store operator is hitting the expansion trail again with a plan to open 100 new outlets across the country this year. The expansion will involve a combination of its retail brands — myNEWS, CU, WHSmith and SUPERVALUE minimart — as well as a new store concept that the group is working on. Called Maru Coffee, it is currently offered at myNEWS outlets.

This comes barely a year after the group announced that it was scaling down its store openings to focus on profitability. In its financial year ended Oct 31, 2023 (FY2023), MyNews added only eight outlets to its store count, bringing the total to 593 outlets.

Is the change of plans a sign of better things to come for the group in FY2024 after suffering four years of losses since the pandemic hit?   

MyNews founder and executive chairman Dang Tai Luk tells The Edge: “I’m more optimistic this year than last. Our data shows that the basket size is improving and in-store sales are improving, too.”

The current basket size per customer is above RM10 at both its main retail outlets — myNEWS and CU. Dang says the same-store sales growth for the group has increased by more than 10%.

MyNews’ annual losses have narrowed, coming in at RM10.7 million for FY2023, close to half of what it was at RM19.62 million in the previous year.

On a quarterly basis, it returned to the black with a net profit of RM947,000 in 4QFY2023 compared with a net loss of RM82,000 a year ago. 

Still, it remains to be seen whether the group will be able to sustain its earnings momentum and break its losing streak, which has marred the group’s performance over the last four financial years.

Analyst consensus expectations are for MyNews to return to profit in FY2024, posting a net profit of RM9.24 million on revenue of RM805.43 million.

Dang is confident that its financial performance in FY2024 will improve, but he stops short of saying whether the quarters ahead will continue to register net profits like it did in 4QFY2023.

“We are working hard to turn around and are optimistic based on the growth we see based on the basket size. All of our retail brands are doing well. We just have to shorten CU’s gestation period and we are working at it from every angle,” he says.

Turning the group’s three-year-old Korean franchise CU profitable has been a bigger challenge than expected, as it has not been able to achieve the three-year gestation period as planned.

CU is the only brand in the group’s portfolio that carries a loss at this point, but Dang is confident that the losses will continue to narrow. A turnaround in CU will definitely give the group’s earnings a leg up.

Despite the longer-than-expected gestation period, Dang believes the CU franchise is a good investment in the long run.

“Once we manage to build it and pull through the breakeven point, it will be okay,” he says.

Dang says the MyNews’ food processing centre (FPC) for its baked goods and ready-to-eat meals, which began operations a few months before the pandemic in 2019, is still registering losses.

He adds that the losses have decreased to a point at which the group is “no longer concerned” about it and the level of wastage of its products at the retail outlets is lower than the industry average, which is in the teens.

In 4QFY2023, the FPC’s losses shrank to RM1.77 million, from RM2.26 million in 3QFY2023.

“What we are doing is to produce more sellable and popular products to serve retail stores. The FPC is serving us well, especially with competition coming into the space. I would feel very worried without an FPC. It will improve. As a whole group, it provides synergy for our retail business,” says Dang. 

MyNews is looking to open its first Maru Coffee outlet in the Klang Valley in the first quarter of this year. 

“From the point of view of a player, we’re in the same business. We’re not diversifying into automobiles or something else. Furthermore, Maru as a brand is doing well.

“We don’t want to limit the growth of Maru to just MyNews convenience stores. So, why not allow Maru to reach more people and to be free on its own to be launched in parallel inside and outside of myNEWS outlets?” he says.

With the coffee culture gaining momentum in Malaysia, Dang believes there is still an opportunity for the group to diversify into that segment, as there is no dominant player for now.

“We’re not saying that we want to be in the top three in that space. What we’re saying is that just like our convenience stores, when we entered the market more than two decades ago, the penetration rate was low — which is similar to what we see now in the coffee space.

“And since we have the product, we might as well do it. Maru Coffee is priced cheaper because we sell it through convenience stores and we want more people to drink it, but that doesn’t mean the quality is not good,” he says, adding that the group has been working on the idea for some time.

Last year, the retail convenience store operator generated market interest after JAG Capital Holdings Sdn Bhd — the private investment vehicle of Plantation and Commodities Minister Datuk Seri Johari Abdul Ghani — emerged as a substantial shareholder in MyNews, with a 9.09% stake, following a private placement by the group that raised about RM28 million.

JAG Capital is currently the second-largest shareholder of MyNews, with a 13.85% stake, after D&D Consolidated Sdn Bhd, the investment vehicle of Dang and his siblings, which has 52.54% equity interest.

Interestingly, even with a substantial stake in MyNews, JAG Capital does not have board representation.

“We have spoken about this, but I think [Johari] had an inkling that he might be called to serve in the government. Had he joined our board, he would have had to resign, anyway,” says Dang.

“Currently, nobody from JAG Capital or his companies is on MyNews’ board and there is no indication whether they plan to be. We are open, however, to board representation from JAG Capital.” 

Asked whether MyNews would be open to Johari’s increasing his stake in the group, Dang says: “I believe that is his plan.” He points out, however, that the group has to be watchful of its public spread and not breach Bursa Securities’ guidelines, as his family has a stake of more than 50% in MyNews.

He adds that the Dang family will remain committed to holding its majority stake in the company.

“Yes, we plan to continue to hold the shares. It is our family’s only business. In fact, [Johari] also wants us to hold the majority stake and continue to drive the company,” he says, adding that the minister does not interfere with the day-to-day management of the business. “He is happy with what we are doing.”

MyNews underwent a round of board reshuffling last year, which saw Dang being redesignated from group CEO to executive chairman after Ding Lien Bing resigned from that position. The group CEO role was assumed by Dang Tai Wen, Dang’s younger brother, who was deputy CEO.

At the same time, there were several changes in the board of directors. All this stirred interest in the market, given that it happened shortly after JAG Capital emerged as a substantial shareholder of the group.

“The change in board is mainly because of timing. During the pandemic, we had a change in the chief financial officer. Our former chairman (Ding) was a finance guy. He was a CFO previously in other organisations and when we were going through the difficult pandemic, he turned independent to become executive chairman to help us through those two years to streamline and cut cost.

“As for the other directors, a couple of them had been around for eight years, nearing that point of hitting the limit of tenure when they had to resign. So, we might as well reshuffle,” he explains.

Dang says he is not slowing down, having taken up the executive chairman position, and the appointment of Tai Wen as group CEO is part of the group’s succession planning.

“Tai Wen has been involved in the business since the beginning and he is the most eligible and experienced. Both of us are actively involved in the business; two engines are better than one. I’ll remain as executive chairman and he will be group CEO for the foreseeable future,” he says.

While some believe that 2024 could continue to be a year of economic uncertainty, with risks on various fronts, Dang takes an optimistic view, saying there is no time like the present for what the group plans to do this year.

“If you wait for the economic graphs to start to show positive signs before moving to open a new store, you will be too late. I’m optimistic, but also cautious,” he says.

MyNews’ share price has declined 27% over the past one year to close at 50.5 sen last Thursday, valuing it at RM378.9 million. According to Bloomberg, of the nine analysts covering the stock, three have a “buy” call, one recommends a “hold” and five have a “sell” rating, with an average target price of 51 sen. 

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