KUALA LUMPUR: RHB Investment Bank Bhd (RHB Research) expects MyNews Holdings Bhd's financial year 2025 (FY25) net profit to reach pre-pandemic levels of RM28 million once CU is no longer a drag on earnings.
The firm said the end of CU's gestation period, progressive contributions from Mynews, and the turnaround of its food processing centre (FPC) should drive a re-rating of the stock.
It added that the consolidation of the management teams of MyNews and CU, leveraging their combined scale, has resulted in stronger bargaining power with suppliers.
"This consolidation has also increased CU's sales by improving the product assortment to better align with customer preferences.
"Additionally, ongoing cost optimisation efforts, such as internalising logistics for more efficient route planning and enhancing waste control and maintenance expenses, have reduced CU's losses.
"We believe CU is at the tail end of its gestation period and is poised to break even by FY24," it said in a note.
RHB Research also said that with a targeted expansion of 100 stores in FY24 and a primary focus on the Mynews brand, it is expected to drive consistent earnings growth moving forward.
It noted that with 34 SuperValue stores as of the first quarter of 2024 (1QFY24), the group plans to gradually convert some MyNews stores into SuperValue outlets to meet growing demand for convenient mini-marts.
Meanwhile, the firm said FPC's losses narrowed drastically to RM200,000 in 1QFY24 due to stronger sales volume, and its utilisation rate is expected to increase from the current breakeven level of 70 per cent, in line with the opening of new stores.
RHB Research has maintained a "buy" call on MyNews, with a higher target price of 81 sen from 68 sen previously.
Key risks to its call include delays in CU's turnaround and weaker-than-expected consumer sentiment.