AllianceDBS starts coverage on Mynews, target price RM1.60

KUALA LUMPUR (Oct 31): AllianceDBS Research Sdn Bhd initiated coverage on Mynews Holdings Bhd shares with a “buy” recommendation and target price (TP) of RM1.60 due to optimism on the convenience store operator’s growth prospects.

According to AllianceDBS analyst Cheah King Yoong’s note today, Mynews’ growth prospect is mainly driven by new store expansion and potentially higher profit margin from better product mix.

Cheah also took note of Mynews’ valuations. “At present, Mynews’s PE (price-earnings) valuation is below its peers and its historical mean valuation, which we believe provides room for further multiple expansion. For Mynews, we have derived a TP of RM1.60, pegged to 25x CY20 (calendar year 2020) PE, which is comparable to its regional peers’ average PE but below its historical mean valuation of 27x.

“Upon the commissioning of its ready-to-eat (RTE) plan in June 2019, Mynews is poised to resume its aggressive store expansion plan by opening ~100/90 stores/annum for FY20/21. Management remains comfortable with pursuing this strategy over the next few years as it believes that the Malaysian market remains under penetrated,” he said.

He said the commissioning of Mynews’ RTE plan allows the group to grow its food and beverage segment, which traditionally commands higher profit margins compared to other product segments.

“As such, the ability for the group to increase its revenue stream through expanding RTE products is also expected to expand its profit margin,” he said.

At Bursa Malaysia, Mynews shares have not been traded so far today. The stock was last traded at RM1.33 on Tuesday (Oct 29), according to AllianceDBS.

Source: TheEdgeMarkets