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Singapore Investment

As a pure play listed consumer counter, can  MYNEWS 5275 MYNEWS HOLDINGS BERHAD reverse its fortunes?

The lifting of the MCO curb may have helped convenience store operator MyNews Holdings Bhd boost its sales but things are not looking better yet.

It returned to the red with a net loss of RM3.2 million in 1QFY2023 from a net profit of RM1.3 million in 4QFY2022 due to a few factors.

For one, the discontinuation of the government’s hiring incentive programme had an impact on its profitability.

It was also dragged by higher admin expenses and financing costs.

Also what happened in the quarter just ended was the unavailability of fair value gains on investment properties.

The disappointing results are reflected in the share price performance.

The counter was trading at a 52-week low of 36 sen last July but managed to hit a high of 72 at the beginning of the year.

However MyNews has since gone downtrend to close at 50 sen on Mar 31.

Over the past one year, the counter has declined by almost 30%.

The company would need a good boost after failing to sustain its profitability in the first quarter of the new.

Many investors were probably positive on the counter when it managed to eek out a profit in 4QFY2022, after being in the red for 10 consecutive quarters.

But the counter was punished, falling as much as 10.5 sen or 18% to 47 sen on Mar 31.

This was because many analysts trimmed their target prices and earnings forecasts following disappointing results for the first quarter ended Jan 31, 2023 (1QFY2023).

Unfortunately, its higher revenue did not stop MyNews from going back to the red.

On a yearly basis, MyNews narrowed its net loss from RM7.86 million for 1QFY2022, as revenue increased from RM139.44 million previously.

Kenanga Research was disappointed as the counter unexpectedly slipped into the red, and was unable to grow its top line to absorb higher costs.

Kenanga lowered its profit forecast for MyNews by 62%, and 38% for FY2023 and FY2024 respectively.

This is to reflect higher operating expenses, particularly labour and electricity costs, and the longer gestation period for CU stores.

The research house also cut its TP by 34% to 50 sen, from 70 sen, as it rolled forward its valuation base year to FY2024 from FY2023, and reduce its earnings forecasts.  

Similarly, CGS-CIMB Research reduced its earnings per share forecasts for MyNews for FY2023 to FY2025 by 20.2% to 73.3% to reflect assumptions of lower operating margins.

This was due to higher operating costs of CU stores and its food production centre.

Its target price was revised to 66 sen, from 83 sen previously.

But the research house maintained its ‘add’ call on MyNews, as it is the only publicly listed pure play as a consumer value store player in Malaysia.

If you believe MyNews will be able to perform much better due to the above, perhaps it is a good entry level at the current share price.

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