SEM (5250) 7-Eleven Malaysia Holdings Berhad
KUALA LUMPUR: RHB Research has initiated coverage on 7-Eleven Malaysia with a Buy call and a target price of RM2 basd on a 28 times FY15F price per earnings (P/E), which is a 17% premium over its regionally-listed peers’ average P/E of 24 times.
In a note on Tuesday, the research house said it is upbeat on 7-Eleven Malaysia’s growth prospects and forecast a three-year earnings CAGR of 29.1% for 2013-2016F, driven by its network store expansion, consistent same-store sales growth (SSSG) and better commission income generated from its in-store services.
"We believe the premium reflects its stronger earnings growth and more exciting prospects compared with its peers.
"We believe that the company’s revenue should improve in tandem with its network expansion plan – which is a net increase of 600 stores over the next three years.
"The company’s store renovation exercise may continue to improve customer experience and drive store t affic. We expect the company’s revenue to expand by a three-year CAGR of 15.4% over 2013-2016F," it said.
It added that it expects the company’s better product mix and higher commission revenue generated from instore services to continue improving its net margin from 3.1% currently.
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