Introduction

Maybank Investment Bank Berhad delivers an insightful overview of Mynews Holdings, providing a detailed analysis of its financial performance and strategic outlook. With a recommendation to maintain a “BUY” status, the report forecasts a promising future for the company, driven by robust sales momentum and strategic expansions.

Mynews Holdings: A Positive Outlook for FY25

Mynews Holdings (MNHB MK) concluded its fiscal year 2024 on a high note, with substantial growth in profitability, driven by a lower-than-expected effective tax rate. The company’s future prospects look bright with anticipated increases in consumer spending, bolstered by higher civil service salaries and minimum wage hikes.

Key Financial Highlights

The fourth quarter of FY24 saw a net profit of MYR 4 million, marking a remarkable 297% year-on-year growth and a 43% increase quarter-on-quarter. This performance resulted in an annual net profit of MYR 9 million, a significant turnaround from a net loss of MYR 11 million in FY23. The revenue for FY24 reached MYR 804 million, a 10% increase from the previous year, aligning with the projected estimates.

Sales Momentum and Profit Margins

Mynews Holdings experienced a 12% year-on-year increase in revenue for the fourth quarter, driven by contributions from new store openings and enhanced in-store traffic. The company added 29 new stores, reflecting a positive same-store sales growth (SSSG). The product mix improvements boosted the gross profit margin to 38%, up by 1.7 percentage points from the previous year, primarily due to higher fresh food sales.

Pre-Tax and Net Profit Growth

The pre-tax profit showcased a 98% year-on-year increase, attributed to the earnings turnaround in its food processing center (FPC) and CU operations. The effective tax rate dropped to 19%, facilitating a net profit growth of 297% year-on-year. This reduction in tax rate was potentially due to the utilization of accumulated business losses from FY20 to FY23.

Earnings Estimates and Future Targets

Maybank maintains its earnings estimates for FY25-FY26, projecting a 102% year-on-year growth in FY25, driven by stronger sales volume and improved group margins. The company targets to open 100 new stores in FY25, adding to its existing 644 stores, which include Mynews, CU, Maru Coffee, and WH Smith outlets.

Investment Recommendation

With a 12-month price target of MYR 0.80, representing a 17% upside from the current MYR 0.69, the report reiterates a “BUY” recommendation for Mynews Holdings. The recommendation is based on a CY25E PER of 32x, aligning with the normalized mean from 2016-2018.

Conclusion

Maybank Investment Bank Berhad’s analysis highlights Mynews Holdings as a strong performer with a promising growth trajectory. The company’s strategic initiatives and financial management have positioned it well for future success, making it an attractive investment opportunity.