MYNEWS’s FY22 results beat expectations due to stronger-thanexpected rebound in sales on the return of the office crowds and commuters. It turned profitable in 4QFY22 thanks to better cost control. We expect utilisation at its food processing centre (FPC) to improve further in tandem with the rising fresh food sales and availability of foreign workers. We maintain our FY23F earnings and introduce FY24F numbers. We keep our TP of RM0.70 and OUTPERFORM call.

FY22 core net loss of RM18.2m came in narrower than expectations, vs. our net loss forecast of RM21.3m and consensus net loss estimate of RM20.2m. The variance against our forecast came largely from a stronger-than-expected rebound in sales driven by the return of the office crowds and commuters.

YoY, FY22 revenue grew by 58% driven by strong sales on the return of the office crowds and commuters as the pandemic came to an end. Core net loss narrowed significantly by 58% thanks to a better product mix with higher margin on fresh food and ready to eat (RTE) meals and cost control measures.

QoQ, 4QFY22 revenue grew by a strong 6.1% for the same reasons as above. MYNEWS was able to return to the black with net profit of RM1.4m (vs. 3QFY22 net loss of RM1.4m) mainly due to improvement in operational efficiency, particularly at its FPC.

Outlook. MYNEWS’s top line will continue to expand driven by: (i) new CU outlets and longer operating hours, and (ii) further improvement in utilisation at its FPC to 80-90% thanks to the rising fresh food sales and availability of foreign workers, from about 70% currently based on our estimate. A strong top-line growth fuelled by higher consumer traffic and better product mix should mitigate additional costs incurred in opening new stores and promoting CU stores.

Forecast. Maintain FY23F numbers and introduce FY24F earnings estimates.

We like MYNEWS for: (i) the still under-penetrated convenience store market in Malaysia with approximately 111 convenience stores per million population currently based on our estimates, vs Thailand, Japan and Australia at 291, 445 and 268, respectively, (ii) its previously halted by the pandemic earnings having returned to the growth path with the turnaround at its FPC and a net addition of 50 stores in FY23, and (iii) its differentiation from competitors through Korean products.

Maintain OUTPERFORM with unchanged TP of RM0.70 based on 22x FY23F PER, in line with the sector’s average forward PER. There is no adjustment to our TP based on ESG given a 3-star rating as appraised by us.

Risks to our call include: (i) the return of movement restrictions, hurting traffic to the stores, (ii) playing field gets more crowded with new entrants or aggressive expansion by existing competitors, (iii) longer gestation period, and (iv) high inventory wastage.

Source: Kenanga Research - 23 Dec 2022