FY21 earnings surprised
U/G to BUY with a higher TP of MYR1.80
SEM’s 4Q21 results were above expectations on lower-than-expected selling and distribution expense. Into FY22, we expect SEM’s CVS and pharmacy stores to experience higher store sales on improved store
traffic and a general improvement in consumer mobility. Our FY22/FY23E earnings estimates are lifted by 12%/13% and we introduce FY24E. We U/G SEM to BUY with a higher TP of MYR1.80 (+25sen), based on updated 5-year average PER of 28x (-1SD to mean, 27x previously) on FY22E.
Earnings outperformance on lower S&D expense
4Q21 core net profit of MYR29m (+166% YoY, +1938% QoQ) brought FY21 core net profit to MYR44m (+1% YoY). The latter was above expectations at 174%/152% of our/consensus full-year earnings estimates. The earnings beat was predominantly due to lower-than-expected selling and distribution (S&D) expense.
4Q21 convenience store SSSG: +18.8%
SEM’s 4Q21 revenue grew 34% YoY driven by higher sales at both its convenience stores (CVS, +22% YoY) and pharmacy stores (+67% YoY) in tandem with relaxed movement restrictions during the quarter. CVS
reported 4Q21 SSSG of +18.8% YoY along with higher gross profit margins of 28% (4Q20: 27%). Meanwhile, 4Q21 pre-tax profit grew by a wider 258% YoY on the back of lower S&D expenses (at 25%, as a percentage of sales vs. 25% in 4Q20).
Positive earnings momentum expected
We raise our FY22/FY23E earnings estimates by 12%/13% upon adjusting for lower S&D cost assumption. Both its CVS and pharmacy store traffic should continue to improve alongside easing restrictions and the
reopening of international borders in FY22. Stronger CVS sales growth will also materialise once it is allowed to resume 24 hour operations.