Investment Highlights

• We maintain our BUY call on Mynews Holdings (Mynews) with unchanged fair value (FV) of RM1.18, based on unchanged PER of 29x (historical average) FY23F EPS. We make no changes in earnings.

• We are optimistic on the company’s long-term prospects stemming from the potential of its Supervalue and CU outlets as well as Mynews’ scarcity premium being one of the few growth stocks in the convenience store retail segment in Malaysia. The company is expected to return to profitability in FY22F as footfall gradually recovers. With the reopening of the economy, Mynews’ outlet network expansion plan is back on track.

• Below are key takeaways from Mynews’ results briefing held yesterday:

1. Early signs of recovery. From management’s observation, consumer spending pattern is gradually normalizing to the prepandemic level, following the relaxation of movement restrictions. Mynews outlets’ sales have now reached 90% of the pre-pandemic level with strong recovery seen for stores located in malls. However, it is a more gradual recovery for office and travel-related outlets. Compared to 3QFY21, Mynews recorded a 24% increase in footfall in 4QFY21. Footfall is expected to continue to improve with longer operation hours of the outlets.
2. Aggressive expansion of CU outlets. Mynews has opened 36 new CU outlets since the beginning of October, bringing its total number of CU stores to 41, YTD. The company is targeting to open 10 new outlets, predominantly CU stores, every month moving forward. As of the end of October, the company has 518 outlets nationwide, including 16 WHSmith stores. Anecdotally, CU stores are seeing positive responses from consumers although sales are still experiencing huge fluctuations as most stores are only recently opened.
3. The food processing centre’s (FPC) utilization rate improved to 45% (from 30–35%), boosted by the rapid expansion of CU outlets in recent months. Fresh food contribution to CU outlets’ sales mix is significantly higher at 60% compared to Mynews’ of 3–5%. The utilization rate will continue to improve in tandem with the rollout of CU outlets moving forward and Mynews expect the FPC to reach the breakeven level in 2HFY22 (70% utilization rate).

Source: AmInvest Research - 24 Dec 2021