Robust growth from its pharma segment
? 1QFY22 core net profit of RM27.8m (+118% yoy) was above expectations at
41.2% of our FY22 estimate and 38.9% of Bloomberg consensus.
? We remain upbeat on 7-Eleven’s FY22 outlook in view of: i) longer operating
hours, ii) aggressive store expansion plan, and iii) strong footfall recovery.
? Reiterate Add with a higher TP of 1.83 (22x CY23F P/E) as we raise our EPS
forecasts for FY22-24F on higher gross margin assumptions.
1QFY22 core net profit surged 118% yoy, above expectations
7-Eleven Malaysia Holdings’s (SEM) 1QFY22 core net profit (CNP) soared 118% yoy to
RM27.8m. At 41.2% of our FY22 estimate and 38.9% of Bloomberg consensus, we deem
this as above expectations. The variance came from i) higher-than-expected total revenue
(+27.8% yoy), driven by both its convenience store segment (CVS) and pharmaceutical
segment sales, which rose 16.7% yoy and 51.9% yoy, respectively, and ii) higher-thanexpected profit after tax (PAT) margin at its CVS (+0.9% pts yoy to 3.2%) and
pharmaceutical segment (+3.2% pts yoy to 6.2%) on longer operating hours, higher footfall
and better margin mix as the economy reopens.
Core profit at its pharmaceutical segment jumped threefold
The pharmaceutical segment’s 1Q22 core profit (segment PAT ex. minority interest) rose
208.3% yoy to RM19.7m. This was mainly attributable to i) higher sales (+51.9% yoy) on
increase in demand for wellness and healthcare products, ii) more favourable margin mix
(higher sales contribution from its higher-margin “Blue Ocean” domestic products in its
pharmacy chains), and iii) inclusion of The Pill House and Wellings pharmacies into Caring.
As a result, SEM’s pharma segment gross profit margin expanded to 22.6% (+3% pts yoy)
in 1Q22. A future long-term growth driver could be its foray into the Indonesian market (via
joint venture) under the brand ‘Wellings’ starting from FY22, in our view.
CVS segment recorded a strong SSSG of 15.2% in 1Q22
In 1Q22, its CVS segment posted strong same-store-sales growth (SSSG) of 15.2% yoy
due to higher retail footfall and longer operating hours during the period (Chinese New
Year holidays), which led sales across all product categories to grow. Moving forward, we
remain positive on SEM’s CVS segment as longer operating hours and strong recovery in
footfall on economic and border reopenings are expected to bode well for future sales.
Additionally, SEM successfully opened 15 7-café store formats in 1QFY22.
Reiterate Add with a higher TP of RM1.83; a reopening play
We reiterate our Add call with a higher TP of RM1.83 (22x CY23F P/E, 1 s.d. below its 5-
year mean P/E of 31.1x) as we raise our FY22-24F EPS forecasts given the more
conducive operating environment. We lower our P/E (29x previously) to account for its high
gearing profile against peers (a risk to rising interest rates) and low liquidity issue. We
continue to like SEM for its solid market share in both the CVS and pharmaceutical
segments and as a strong proxy for both economic and border reopening.