Investment Highlights

• We maintain our HOLD call on Mynews Holdings (Mynews) with a higher fair value of RM0.56/share (vs. RM0.41/share previously), based on a FY23F PE of 27x vs. 24x originally. We raise our fair value for Mynews due to its improving outlook and revised FY23F EPS. The new target PE is near its -0.5SD 3-year pre-pandemic FY17-FY20 average of 30x. The FV also reflects an unchanged neutral ESG rating of 3 stars.

• We raise our earnings forecast for Mynews by 21% for FY23F and 19% for FY24F. Our new earnings forecasts account for higher ISS (in-store sales) growth and addition of 72 outlets in FY23F.

• Mynews’ FY22 core net loss (CNL) of RM18mil was in line with our forecast but above consensus. Consensus had forecast a net loss of RM26mil for Mynews in FY22. Mynews did not declare any interim dividend for 4QFY22.

• YoY, the group’s FY22 revenue rose by 58% buoyed by 67 outlet additions, longer business hours and improved ISS. Coupled with a gross margin improvement of 4 pp YoY resulting from a better sales mix, Mynews’ CNL declined by 58% to RM18mil in FY22.

• 4QFY22 revenue surged by 85% YoY to RM181mil due to similar reasons. As a result, Mynews swung into the black with a core net profit (CNP) of RM1.4mil in 4QFY22 compared to a net loss of RM9mil in 4QFY21. The group’s EBITDA also jumped 19x YoY in 4QFY22.

• Separately, WH Smith, a 50/50 joint venture with UK-based WHSmith Plc, contributed RM503,000 (+19% QoQ, +5x YoY) in 4QFY22. On a full year basis, it recorded a net profit of RM668,000 vs. a net loss of RM744,000 a year ago.

• Mynews’ administration expenses went up by 14% YoY in FY22 as workforce expanded after the pickup in business activities. Selling and distribution spending also jumped by 48% YoY in FY22. The group added 14 new CU outlets bringing its total CU stores to 125 at the end of 4QFY22. Currently, the group has 464 myNEWS outlets, 128 CU and 17 WHSmith, bringing its total outlets to 609.

• In spite of Mynews’ aggressive expansion of its outlets, we are cautious as the gestation period for CU may take longer-thanexpected.

• Mynews currently trades at a FY23F PE of 30x, on par with its 3- year pre-pandemic FY17-19 average.

Source: AmInvest Research - 23 Dec 2022