| Investment Bank | TA SECURITIES |
|---|---|
| TP (Target Price) | RM0.25 (+25.0%) |
| Last Traded | RM0.20 |
| Recommendation |
A prominent Malaysian retailer reported a robust first quarter for FY26, with core net profit surging 40% year-on-year to MYR59 million, effectively meeting market expectations. This strong financial outcome was primarily fueled by significant gross profit margin expansion and stringent operational expenditure control, which successfully counteracted a dip in same-store sales growth (SSSG). Following this performance, TA SECURITIES has issued a BUY recommendation for the stock, raising its target price to RM0.25, indicating a potential upside of 25.0% from the last traded price of RM0.20.
Performance Review
For the first quarter of FY26, the retailer’s revenue grew 3% year-on-year to MYR684 million. This expansion was largely underpinned by the net addition of 85 new outlets, boosting the store network by 28%. Despite facing a challenging environment where SSSG declined by 12.7% due to negative demand reaction following a mid-April price increase, the company demonstrated strong operational resilience. The price adjustments effectively expanded the gross profit margin by 6.4 percentage points year-on-year, more than offsetting a 3.1 percentage point increase in operating expenses relative to revenue, largely attributable to higher minimum wage effective February 2025. Quarter-on-quarter, revenue was marginally lower by 1% due to softer demand. However, operating expenses as a percentage of sales shrank by 1.9 percentage points, reflecting efficiency gains from enhanced productivity, even as gross profit margin remained relatively flat due to aggressive promotional activities aimed at enticing footfall.
Future Outlook and Strategic Initiatives
Looking ahead, management anticipates a moderate expansion in gross profit margins following the discontinuation of the “Sama Bantu” price promotion in early October. The company’s strategic focus will shift towards new product launches, optimizing its product mix, and developing house brand products to enhance value-for-money appeal for cost-conscious consumers. Store expansion plans are progressing ahead of schedule, with 81 new sites already approved for FY26 against a target of 70. Furthermore, the planned refurbishment of 15-20 older outlets with refreshed store concepts and enhanced layouts is expected to drive improved SSSG and higher sales productivity. Management forecasts SSSG to return to positive territory in 4QFY26, noting that supply chain disruptions, a significant factor behind earlier SSSG weakness, have largely been resolved. The retailer also announced a quarterly dividend payment policy, with a first dividend per share of 0.5 sen declared.
Investment Perspective
TA SECURITIES’ positive recommendation is underpinned by the company’s solid execution in managing costs and margins, alongside its clear and proactive strategic roadmap for sustained growth. The raised target price of RM0.25 reflects confidence in the company’s ability to navigate market challenges and capitalize on its expansion and efficiency initiatives, presenting a compelling investment opportunity.
