Investment Highlights

• We maintain BUY call on Mynews Holdings (Mynews) with a higher fair value of RM0.78/share (from RM0.65/share previously) based on a rolled-forward FY25F P/BV of 2.3x - raised 0.5 std deviation above the 5-year mean of 2.0 given the recovery in earnings prospects. Our neutral ESG rating of 3-star is unchanged.

• 1HFY24 earnings of RM3.0mil came within our expectation, reflecting 51% of our full-year forecast but below consensus at only 8.2 32%. 1.1 1.5 2.

• The group turned around to a 1HFY24 net profit of RM3mil compared 6.1 to loss of RM9.5mil in 1HFY23. This was mainly due to improving in- - store sales in tandem with higher footfalls across its brand outlets. 3.4 6.

• QoQ, 2QFY24 revenue declined marginally by 1.4% due to the - fasting month of Ramadan. Gross profit margin improved by 110bps 4.3 to 37.9%, contributed by better sales mix and improvement in CU 0.1 business, which drove up Mynews’ net profit by 37% QoQ to RM1.7mil.

• Moving forward, we maintain our positive view on Mynews’ earnings trajectory on our conviction that the worst is over with 3 consecutive profitable quarters.

• We believe that Mynews’s earnings growth will be propelled by:
  
  (i) the opening of new stores and improving in-store sales with better sales mix,
  
  (ii) the food processing centre is likely to turn profitable with better economies of scale,
  
  (iii) higher gross margin on improving inventory control, and th
  
  (iv) better product mix that skews towards higher-margin products 9.1 1.3 in CU stores.

• Mynews currently trades at a decent FY24F P/BV of 1.9x vs. its 5- year average of 2x.

Source: AmInvest Research - 24 Jun 2024