AmInvestment Bank upgrades MyNews 5275, raises fair value to RM1.24
KUALA LUMPUR (March 22): AmInvestment Bank Research has upgraded MyNews Holdings Bhd to "buy" at 81 sen with a higher fair value (FV) of RM1.24, based on a one-year average historical forward price-earnings ratio (PER) of 29 times earnings per share (EPS) for the financial year ending Oct 31, 2022 (FY22) (versus 21 times previously).
The research house said in a note today the previous PER of 21 times was to reflect the impact of the Covid-19 pandemic on its earnings.
“Also, we believe that the 44.9% fall in MyNews’ share price from a two-year high of RM1.47 on July 8, 2019 has already reflected start-up losses from its food processing centre (FPC),” it said.
While the FPC posted a loss after tax of RM12.4 million for FY20, it believes that the FPC will make smaller losses of roughly RM4 million for FY21 before breaking even in FY22.
Although the opening of South Korean brand CU stores is seen as MyNews’ most prominent driver of growth, it believes that its effect as a catalyst to MyNews’ pre-existing stores is vastly overlooked.
“The synergistic dynamics between the two convenience store franchises are something worth considering,” it said.
At its core, it said, CU stores provide flexibility by removing restrictive growth trajectories of MyNews stores.
“It does this by acting as a separate channel to offload FPC production. This leaves MyNews outlets with less pressure on its fresh food segment to perform,” it said.
It also foresees two core benefits for MyNews. Firstly, MyNews does not have to bear the brunt of its advertisement and promotional expenses to promote its fresh food range.
“Instead, it can focus on making collaborative efforts that have higher drawing power, much like 7-Eleven,” it said.
Secondly, the group would have flexibility in developing outlets with different convenience store models.
It also said that for FY21, MyNews will still face poor footfall and prolonged gestational cost of the FPC.
“In the longer term, however, we strongly believe that MyNews will be a force to be reckoned with. We like the CU partnership as well as synergistic benefits it offers to existing MyNews outlets,” it said.
At 9.43am today, MyNews had dipped 0.62% or half a sen to 80.5 sen, valuing it at RM549.13 million.
http://www.theedgemarkets.com/article/aminvestment-bank-upgrades-mynews-raises-fair-value-rm124
