Research houses say the worst may finally be over for the convenience store operator, which has suffered two straight years of net losses and a slump in its share price.
MyNews posted a net profit of RM1.27 million for Q1 FY2024 from a net loss of RM3.21 million a year ago while revenue rose 6% to RM195.52 million from RM184.09 million, it said in a bourse filing yesterday.
The positive news boosted its share price today, rising as much as 12% or 6 sen to 58 sen in morning trade, its highest level in six months. It pared its gains by the close of trade, edging up 3.85% or 2 sen to 54 sen, valuing the group at RM401.2 million.
Its shares had fallen some 37% in 2021-2023 as the group suffered losses due to higher expenses at its food processing centre, offsetting robust sales at its outlets.
MyNews currently operates 619 retail outlets including 468 myNEWS outlets, 132 CU outlets, and 19 WHSmith outlets.
In a note today, RHB Investment Bank says it believes “the worst is over” for MyNews and expects improvement in traction for its CU Korean convenience stores, paving the way for a turnaround for this lossmaking business unit in FY2024F.
“Additionally, the robust expansion of the myNEWS brand is poised to further offset narrowing losses from other business units,” it said.
RHB has maintained its “buy” call with a target price (TP) of 68 sen.
It noted that its Q1 FY2024 revenue rose 6.2% to RM195.5 million thanks to improvements in overall in-store sales, despite minimal net store openings. Its food processing centre (FPC) losses narrowed to nearly breakeven levels at RM0.2 million for the quarter from RM1.8 million previously due to an improved utilisation rate.
Expansion drive
Mynews will ramp up its outlet expansions, targeting to open more than 100 new stores (70% myNEWS, 30% CU) in FY2024, it said.
“The focus on expanding the myNEWS brand will be the key driver for sustainable profitability, aiming to offset losses from other units given its consistent track record of strong and stable performance,” RHB added.
Meanwhile, AmInvestment Bank (AmInvest) has upgraded its call to “buy” from “hold” previously with a higher TP of 65 sen.
“Moving forward, we turn positive on MyNews’s earnings as we believe the worst is over with two consecutive quarters of profit,” it said in a note today.
It added that its earnings growth will be propelled by the opening of new stores and improving in-store sales, better product mix that skews towards higher margin products in CU stores, and the FPC likely turning profitable with better economies of scale.
MyNews was founded by its executive chairman Dang Tai Luk in 1996 and has since evolved from a single newsstand to one of the largest homegrown retail convenience store chains in Malaysia with over 600 outlets, the majority of them located in the urban areas of Peninsular Malaysia.
Last year, the company was in the news after JAG Capital Holdings Sdn Bhd, the private investment vehicle of plantation and commodities minister Johari Ghani, emerged with a 9.09% stake following a private placement by the group which raised about RM28 million.
JAG Capital is the second-largest shareholder with a 13.85% stake after D&D Consolidated Sdn Bhd, the investment vehicle of Dang and his siblings Tai Wen and Tai Hock, which has a 53.59% equity interest.
In its note today, RHB alluded to the positive role that JAG Capital could play in MyNews’ future growth. “We believe the expansion will be further aided by the new shareholder providing valuable insight and suggestions on the business,” it said.