While new store openings will drive growth, it will be enhanced further with the introduction of ready-to-eat food and the new Maru Café offerings. EPS is expected to chart a CAGR of 21% over the next two years BUY with a target price at RM1.55 based on 27x FY20E EPS in line with regional peers’ average PER. We like MYNEWS for its (i) double digit earnings growth (c.20%), and (ii) aboveindustry earnings margin (c.7%).

Management prides itself as having the first central processing kitchen facility in the country - 120k sf - located in the vicinity of MyNews HQ in Kota Damansara. Just completed, commercial production commenced in stages starting 11th June 2019. The in-house processing plant production is supported by its JV companies targeting to supply to 300 stores, eventually rising to a maximum capacity for 600 stores.

Barely a year in operations, the Maru Cafes have showed encouraging growth. The 90 stores where Maru Cafés are currently located have registered +19% growth in outlet sales, +15% in customer count and +13% basket size.

MyNews Kineya SB (RM25m paid-up share capital, equipment cost RM16m) is a JV company between MyNews Food SB (51%) and Gourmet Kineya Co. Ltd (49%) which is to produce ready-to-eat food (RTE). MyNews Ryoyupan SB (RM20m paid-up share capital, equipment cost RM13m) is a JV company between MyNews Food SB (51%) and MRA Bakery SB (49%) to produce bakery products.

Competitively priced, fresh (shelf life ranges from 1 day to 3 days) and a range of food offerings that fits the local palate are reasons why we think MyNews venture into convenience ready-to-eat food stands a good chance of succeeding. There are plans to open at least 80 net new outlets in FY19, which is the same target as FY18 (total 456 outlets as of 31st April 2019).

Source: Rakuten Research - 26 Jun 2019