Mynews Holdings Berhad (Mynews) reported improved quarter-on-quarter earnings despite the softer seasonality of the fasting month, prompting RHB Investment Bank (RHB) in today’s report (June 24, 2024) to maintain its BUY rating and set a target price of RM0.81, projecting a 25.6% upside. The consolidation of CU and Mynews management teams enhanced sales and gross profit margin (GPM) through stronger bargaining power and an improved product assortment, contributing to the company’s better-than-expected performance.
For the first half of FY24 (1HFY24), Mynews’ core profit of RM4.4 million met 34% of RHB’s and 47% of consensus forecasts. This was attributed to improved contributions from six new stores and better in-store sales, resulting in a revenue increase of 8.4% year-on-year (YoY) to RM388.3 million. The company’s GPM expanded by 3.3 percentage points to 37.4%, driven by better wastage control and increased bargaining power with suppliers.
In the second quarter of FY24 (2QFY24), Mynews’ sales dipped slightly by 1.4% quarter-on-quarter (QoQ) to RM192.8 million due to the impact of Ramadan and a shorter operating month in February. However, core earnings surged by 46.2% QoQ to RM2.6 million, supported by the aforementioned GPM expansion and narrowed losses at the food processing centre (FPC), which were reduced from RM5 million to RM1.6 million.
RHB anticipated that CU’s losses would continue to narrow, potentially reaching breakeven by the end of FY24, driven by the consolidation of management teams and improved product offerings. This improvement was expected to boost group profits to pre-pandemic levels. Mynews demonstrated consistent and strong earnings delivery, with plans to expand by opening 100 new stores (70% Mynews, 30% CU) in FY24, further enhancing sales volume and FPC utilisation rates.
No changes were made to earnings forecasts or the DCF-derived target price of RM0.81, which includes a 2% ESG premium. RHB’s target price implied a 20.2x FY25F P/E, aligning with pre-pandemic levels.
Investors are encouraged to consider Mynews shares due to the company’s robust market position, strategic management consolidation, and significant growth potential, which could drive the stock price up by 25.6% to the target price of RM0.81.
