3QFY21 results were in-line with our expectations. We expect sequential earnings to return to the black as store footfall increases alongside the gradual uplift in lockdown restrictions from mid-Aug 2021 onwards. Resumption of new store openings plans will also translate to better top-line growth going forward. Our earnings estimates, HOLD call and MYR0.93 TP (based on normalised 32x FY22 PER; mean) are unchanged.
3QFY21 net loss widened
MNHB’s 3QFY21 net loss of MYR15m (2QFY21 net loss: MYR10m, 3QFY20 net loss: MYR6m) brought 9MFY21 net loss to MYR34m (9MFY20 net loss: MYR4m) against our/consensus FY22 net loss estimates of MYR29m/MYR20m. We deem MNHB’s set of results to be within our expectations in anticipation of MNHB turning profitable in 4QFY21.
Another lockdown-impacted quarter…
3QFY21 revenue fell 15% YoY mainly due to adverse sales impact led by various phases of lockdown during the quarter and the closure of 16 Mynews stores YoY. Selling, distribution and administrative expenses reported a 14% YoY growth due to (i) a low base in 3QFY20 where its food processing centre (FPC) was shut for 6 weeks and (ii) added headcount and marketing costs attributed to its CU stores. This led to a wider MYR16m pretax loss (vs. MYR8m pretax loss in 3QFY20).
…but the worst is over
We expect MNHB to turn profitable in 4QFY21 in light of easing lockdown measures from mid-Aug 2021. The transition of Klang Valley (KV) to Phase 2 of the National Recovery Plan (NRP) will bode well for the group given that c.80% of Mynews stores are located within KV. Recent news announcements also indicate that convenience stores will soon be able to extend their operational hours to midnight in all States. Further, as construction activities are no longer restricted, MNHB will be able to resume its plans for new store openings (Mynews, Mynews Super value & CU). We make no changes to our earnings estimates.