CGSI Research said the management’s focus has been on upgrading existing stores as well as closing non-performing stores.
PETALING JAYA: MyNews Holdings Bhd’s earnings are expected to be supported by growth in private consumption and its Maru coffee offerings.
CGS International (CGSI) Research said it came away from its meeting with MyNews’ management still positive with the trajectory of the group’s revenue and earnings.
“Despite only 16 net store additions in the nine-month period for financial year 2024 (9M24), better consumer sentiment and higher footfall lifted MyNews’s same-store sales growth (SSSG) close to 10% in 9M24,” it said in a report yesterday.
CGSI Research said the management’s focus has been on upgrading existing stores as well as closing non-performing stores.
This has kept new store openings below its target of 100 stores for financial year 2024 (FY24).
“The store opening target set for FY25 is another 100 stores, which is double our store opening estimates and could provide further upside to our revenue forecasts,” the research firm said.
MyNews recently opened its first Maru Cafe outlet at Intercontinental Hotel, having received positive feedback on its Maru coffee offerings.
“We think Maru Cafe would help to expand MyNews’s existing coffee and fresh food offerings, and provide it with more flexibility in its expansion with plans to open another 20 Maru Cafe outlets in FY25 across the Klang Valley.
“This should play into our overall thesis of private consumption growth and store openings driving FY25 earnings past FY19 highs,” CGSI Research said.
The research house also projected that MyNews’s margins moving forward would be sustainable as most of the group’s staff were already being paid above the minimum wage due to various incentives.
“The rental rates for its stores have also mostly been renegotiated with year-on-year hikes in the single digit percentage and there is a possible slowdown of growth in its higher marketing expenses for FY25, after fine-tuning its approach based on the effectiveness of the new marketing initiatives it has embarked on in FY24.”
CGSI Research reiterated an “add” call on MyNews with a target price of RM1.18 per share. It believes that as investors gain confidence in the sustainability of the group’s earnings recovery, MyNews’s valuation will be re-rated upwards.
The research house said key downside risks include a sharp increase in operating costs and lower-than-expected revenue.
