KUALA LUMPUR (March 1): Two research houses have a “hold” call on 7-Eleven Malaysia Holdings Bhd after its net profit shrank 91% to RM2.65 million in the fourth quarter ended Dec 31, 2022 (4QFY2022).
Its net profit declined from RM29.4 million in 4QFY2021 due to higher operating expenses amid higher store operation-related expenses, longer operating hours, the minimum wage effect, and increased in-store maintenance activities, despite revenue improving to RM992.42 million from RM795.06 million.
In a research note, Maybank Investment Bank (MIB) downgraded the counter to “hold” with a new target price (TP) of RM1.90, from RM2.35 previously. The new TP was based on unchanged 28 times FY2023 estimates (FY2023E) price-earnings (P/E) ratio, about 0.55 standard deviations to the mean.
“4Q2022 results fell below our/consensus expectations due to higher-than-expected operating expenses,” said analyst Jade Tam. “With heightened internal cost pressures and expectations for ongoing subdued consumer sentiment, we reduce our FY2023E-FY2024E earnings by 20%-21%” she added, after imputing lower gross profit margins and higher other expenses.
Meanwhile, CGS-CIMB maintained a “hold” with an unchanged TP of RM1.72, based on 22 times calendar year 2024 forecast (CY2024F) P/E, one standard deviation below its five-year mean P/E of 31.1 times.
This takes into account its low liquidity and higher gearing ratio amid rising interest rates, as current valuations have accounted for near-term weak earnings prospects.
“We keep our FY2023-FY2024F earnings estimates unchanged, pending further details from its briefing on March 7, 2023, and introduce our FY2025F estimates.” said analyst Khoo Zhen Ye.
Source: TheEdge - 2 Mar 2023
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