MyNews officially launched its Food Production Centre (FPC) yesterday growing the fresh food sales to stay competitive in the industry, especially with the introduction of its online convenience stores delivery services, MyNews Dash. BUY with a TP of RM1.55 based on 27x FY20E EPS.

MyNews’ Food Production Centre (FPC) has been operating for four full months since the launch of ready to eat (RTE) commercial sales in June. Management is re-strategizing RTE sales to reduce wastage and raise sales volume. Note that, monthly RTE sales were steady at RM3m with wastage having been reduced from 40% initially to 20% currently, and we expect to see gradual improvement in its operating efficiencies in the upcoming quarters.

MyNews Dash delivery started just last month via a mix of internal staff and partnership with Grab Express which we believe will boost the fresh food volume sales and increasing brand visibility. Management noted that only marginal cost was incurred as the services operated out of 8-10 hubs initially (startup hub is Taman Tun) targeting to cover the whole of Klang Valley based on demand.

Currently, RTE are served in around 304 outlets out of its 519 outlets nationwide, with 420 outlets in Klang Valley. Stores with Maru Cafés offerings are currently only at 150 outlets, with upcoming 50 ice cream machines ready to be installed.

Competitively priced, fresh (shelf life that ranges from 1 day to 3) and a range of food offering that fits the local palate are main reasons why we think MyNews’ venture into convenient ready-to eat food stands a good chance of succeeding. This new product range and revamping stores to increase sales are keys to raising the asset turnover and hence we are likely to see improvements in ROE going forward. There are plans to open at least 85 net new outlets in FY19. As of 31st September 2019, Mynews has opened of 79 (net) new outlets with a base of 519 outlets.

Source: Rakuten Research - 3 Oct 2019