MEDIA and convenience store retailer MyNews Holdings Bhd may have to endure further financial hardships on the back of prolonged and volatile intensive lockdown which will essentially cap its operating hours and footfall to its outlets.
Even as the company’s prospects for 2H FY2021 is likely to be bleak given the prolonged lockdown, Kenanga Research is positive with MyNews given the foundation placed to ride the economic recovery post pandemic.
“Revenue is expected to be supported by the opening of its Korean brand CSV (CU) in April of which MyNews is targeting to open between 30 and 50 CU outlets in CY2021,” opined analyst Ahmad Ramzani Ramli in a results review.
According to Kenanga Research, the addition of CU into the group’s portfolio would enable MyNews to:
- Achieve higher utilisation of its food processing centre (FPC) (currently at circa 35%, breakeven at 70%);
- Allow the group to be the first Korean CVS chain player in Malaysia by tapping into the persistently rising popularity of the K-Culture; and
- Potentially boosting the group’s overall margin due to the higher fresh food content of CU stores.
“Altogether, MyNews will add in 100 more outlets (both CU and MyNews) for CY2021 with half expected to be outside of the Klang Valley,” revealed the research house. “Its latest brand Maru – buns & café (better margins) – is also expected to ride along these expansion outside of the Klang Valley.”
MyNews’ 1H FY10/2021 core net loss of RM19.3 mil came in below Kenanga Research’s and consensus earnings forecasts of RM6 mil and RM8 mil respectively as intensive lockdown prevailed throughout the period in review.
“Dividends, historically declared during this period, was absent given the financial challenges posed by the on-going pandemic,” noted the research house.
All-in-all, Kenanga Research downgraded MyNews to “market perform” (from “outperform” previously) while revising downward its target price to 95 sen (from RM1 previously).
Nevertheless, RHB Research continued to be bullish about MyNews on grounds that its earnings growth prospects remained exciting.
“With the offerings at CU being sourced from MyNews’ FPC, the potential improvement in its utilisation rate should continue to help reduce its losses,” analyst Soong Wei Siang pointed out.
“More importantly, MyNews stands to be a prime beneficiary of the gradual return in footfall upon vaccination reaching critical mass which should see its outlets (including those at office buildings and transportation hubs) registering higher sales when mobility normalises upon the broader reopening of economic activities, making it a relevant proxy to recovery play.”
On this note, RHB Research maintained its “buy” call on MyNews with a new discounted cash flow (DCF)-derived target price of RM1.20 (from RM1.25 previously).
At the close of today’s morning session, MyNews was down 2.5 sen or 2.82% to 86 sen with 755,400 shares traded, thus valuing the company at RM587 mil. – June 28, 2021
