KUALA LUMPUR (April 2): RHB Small Cap Asean Research has maintained its “hold” rating on MyNews Holding Bhd at RM1.02 with a higher target price (TP) of RM1.25 after reflecting upon MyNews’ CU outlets, a South Korean convenience store chain, following the reception met at the flagship’s grand opening.
In a note today, RHB analyst Soong Wei Siang said MyNews targets to open 500 CU stores in Malaysia in five years, of which 30 to 50 stores are being targeted to roll out for FY21.
He said the South Korean brand could provide a strategic platform for MyNews to offer its fresh food products, allowing for leverage on the higher-end brand image that attracts consumers with higher spending power.
“Ready-to-eat food items and their packaging are all sourced from MyNews’ food processing centre (FPC) providing an opening for synergistic benefits. Overall these benefits would result in an expected improved plant utilisation rate, which is currently reported at 30%.
“We believe the CU chain will be able to give its competitors a good run for their money, judging from the wide offerings of hygienic and delicately packaged South Korean-themed products at reasonable prices,” he added.
Having considered the encouraging reception of the grand opening, the potential of a shorter gestation period is not being ruled out, with current breakeven expectation for the stores and FPC being two years, the analyst noted.
“We tweak our risk assumptions in our DCF model to reflect the lower risks associated with a long-term drag from the FPC and an extended gestation period for the CU stores post visit.
“Our TP now implies a 28.4x FY22F P/E, which is around the stock’s five-year historical mean and is at a discount to 7-Eleven Malaysia Holdings Bhd,” he said.
At 10:47am, MyNews shares were unchanged at RM1.02, valuing the group at RM691 million.
