KUALA LUMPUR (March 31): Shares in MyNews Holdings Bhd fell as much as 10.5 sen, or 18%, to a low of 47 sen on Friday morning (March 31), after some analysts covering the stock cut their target prices (TPs) and earnings forecasts, following disappointing results for the first quarter ended Jan 31, 2023 (1QFY2023).
At 10.21am, the stock had trimmed its losses — down 6.5 sen or 11.3% at 51 sen — giving it a market value of RM347.9 million.
MyNews was among the top 20 losers on Bursa Malaysia, with 2.8 million shares traded. Since the beginning of this year, its share price has fallen 19.05%.
MyNews posted a net loss of RM3.21 million for 1QFY2023, compared to a net profit of RM1.3 million for 4QFY2022, due to the discontinuation of the government’s hiring incentive programme, the unavailability of fair value gains on investment properties, higher administrative expenses, and an increase in financing costs.
It is worth noting that the group made a profit in 4QFY2022, after being in the red for 10 consecutive quarters.
Meanwhile, revenue increased slightly to RM184.09 million for 1QFY2023, from RM180.6 million for the immediate preceding quarter, due to new outlets, longer opening hours and an improvement in overall shop sales, following the lifting of Covid-19 restrictions.
On a yearly basis, MyNews narrowed its net loss from RM7.86 million for 1QFY2022, as revenue increased from RM139.44 million previously.
In a note on Friday, Kenanga Research assessed MyNews' latest financial results as disappointing, as the group unexpectedly slipped into the red, and was unable to grow its top line to absorb higher costs.
“It disappointed with a 1QFY2023 net loss of RM3.2 million, versus our full-year net profit forecast of RM23.8 million, and the consensus full- year net profit estimate of RM14.4 million. The variance against our forecast came largely from its inability to grow its top line strong enough to absorb higher costs, particularly staff cost,” said the research firm.
As a result, Kenanga lowered its FY2023 profit forecast for MyNews by 62%, and by 38% for FY2024, to reflect higher operating expenses, particularly labour and electricity costs, and the longer gestation period for CU stores.
The stock was also downgraded to "underperform" from "outperform", as Kenanga is concerned about the volatility in its quarterly results and the seemingly longer gestation period of CU stores.
“We lower our TP by 34% to 50 sen, from 70 sen, as we roll forward our valuation base year to FY2024 (from FY2023), and reduce our earnings forecasts.
“We value MyNews at 19 times forward price-earnings ratio (PER), at a 20% discount to the forward PER of its listed competitor, to reflect MyNews’ quarterly earnings volatility,” said Kenanga.
CGS-CIMB Research also lowered its earnings per share forecasts for MyNews for FY2023 to FY2025 by 20.2% to 73.3% to reflect assumptions of lower operating margins due to higher operating costs of CU stores and its food production centre.
In tandem with the earnings cuts, CGS-CIMB’s TP was revised downwards to 66 sen, from 83 sen previously.
“We maintain our ‘add’ call on MyNews, as it is the only publicly listed pure play as a consumer value store player in Malaysia (with a scarcity premium), and we believe it remains on track to achieve profitability in the second half of FY2023 once operating leverage kicks in,” added the research firm.