ONGOING cost optimisation efforts are expected to drive earnings growth for 7-Eleven Malaysia Holdings Bhd, with the potential synergy from the acquisition of the Caring pharmacy chain to contribute as well, according to RHB Investment Bank.
“We believe earnings growth will resume in the second half of 2020, further aided by 7-Eleven’s business rationalisation and cost optimisation initiatives, which have already resulted in opex moderation.”
“In addition, we expect cost synergies to arise after the consolidation of Caring Group, from the procurement perspective as well as the sharing of certain fixed costs,” said RHB analyst Soong Wei Siang.
The analyst also said that management expects trading conditions to gradually recover towards 2H20, and that 7-Eleven will continue to explore opportunities for growth in other channels.
This follows 7-Eleven’s 1H20 results having come broadly within expectations, with a core net profit of RM28.5 mil coming in at 10.7% higher year-on-year. This also meets 46% of RHB’s forecasts.
However, this does not account for corporate expenses for the acquisition of Caring Group, which totalled RM16.1 mil in 1H20.
RHB upgraded its call for 7-Eleven to a buy call from a previous neutral call, with a higher target price of RM1.67 from a previous RM1.38.
At the end of the morning’s trading, 7-Eleven’s shares were last done at RM1.36, up 3 sen, with 532,300 shares traded. – Aug 27, 2020
