Investment Highlights

• We maintain BUY call on Mynews Holdings (Mynews) with unchanged fair value of RM0.78/share, based on FY25F P/BV of 2.3 0.5 std deviation above the 5-year mean of 2.0 given the recovery earnings prospects. Our neutral ESG rating of 3-star is unchanged.
   
• Our forecasts are maintained after the analyst briefing yesterday. 26F
   
  • To recap, 2QFY24 gross margin improved by 110 bps to 37.9 8.2 QoQ primarily due to better control measures on food wastag 1.1 during the Ramadan period. Food wastage previously impact 1.5 2.0 earnings profitability during the pandemic. We expect this marg 6.1 improvement to be sustainable as management continues - effectively monitor and manage wastage going forward. 3.4 6.6
     
  • The food processing centre (FPC) segment reported a worse lo - of RM1.4mil in 2QFY24, compared to a loss of RM0.2mil in 1QFY2 4.3 The wider loss was due to lower economies of scale during t 0.1 fasting period. However, we expect FPC to turnaround this ye with higher footfalls and more store openings, which will boo productivity through economies of scale. The utilisation rate f the FPC hovered at 70% in 1QFY24-2QFY24.
     
  • Management remains hopeful that the CU business will tu profitable this year, leveraging on synergies with the Mynews tea to overcome the prolonged gestation period.
     
  • Management has announced the opening of a new format f standalone Maru café stores in September 2024, with a store spa of 200,000 square feet for a single cafe. These cafés will carry mo stock keeping units and exclusive products compared to t smaller Maru cafés within Mynews stores. The target is to open standalone Maru café stores by the end of 2024. Given these ne th concept stores will take time to gain market acceptance, we do n expect significant contribution to the group in the medium term 9.1 1.3
     
  • The target of opening 100 stores in 2024 remains intact, with stores opened YTD. Management has identified 70 store location for 2HFY24 across all 3 brands – Mynews, CU and Superval stores. Hence, we expect an acceleration in store openings 2HFY24.
     
• We believe that Mynews’s prospective earnings growth will propelled by:
  
  (i) the opening of new stores and improving in-store sales with bett sales mix,
  
  (ii) the FPC is likely to turn profitable with better economies of sca
  
  (iii) higher gross margin on improving inventory control, and
  
  (iv) better product mix that skews towards higher-margin products CU stores.

• Mynews currently trades at a decent FY24F P/BV of 1.9x vs.

Source: AmInvest Research - 25 Jun 2024