Retailer Delivers Strong Earnings on Cost Management

A leading Malaysian retailer has delivered robust financial performance for the first nine months of 2025 (9M25), with results meeting market expectations. The strong showing was primarily driven by solid sales growth and effective cost management strategies, reinforcing its position as a key beneficiary of government fiscal support programs.

Performance Review

For the 9M25 period, the company recorded a core net profit of MYR457 million, marking an 18% year-on-year increase. This figure accounted for 72% and 75% of the full-year forecasts from the investment bank and consensus estimates, respectively. Revenue for 9M25 surged 13% year-on-year to MYR8.4 billion, propelled by significant new store expansion, with 269 new outlets (a 10% year-on-year increase) bringing the total to 2,966 stores. Same-store sales growth (SSSG) also contributed positively, achieving 6.5%.

The healthy gross profit margin expansion, indicative of strong operational leverage, successfully offset increased operating expenses resulting from factors such as minimum wage hikes. While third-quarter (3Q25) revenue saw a 12% quarter-on-quarter jump to exceed MYR3 billion, thanks to extended operating hours and growing contributions from the Sumbangan Asas Rahmah (SARA) program, net profit growth for the quarter was a more modest 5%, attributed to higher operating expenses and slightly lower gross profit margins during the period.

Strategic Initiatives and Future Outlook

The outlook for the company remains positive, with expectations of sustained growth. The government’s planned increase in budget allocation for the SARA program in 2026 is seen as a significant tailwind, given the retailer’s established market position and its active participation with over 2,000 SARA-activated outlets.

The company is well-positioned to capitalize on rising disposable incomes among lower-income groups and the prevailing trend of consumers downtrading to mini-markets amidst inflationary pressures. Strategic initiatives to expand its addressable markets further underpin long-term earnings growth. These include diversifying sourcing options, developing a bulk sales platform, and a cautious expansion beyond Malaysia, with its first overseas stores now open in Fuzhou, China, currently operating three outlets. Domestically, the company has completed its presence in every Malaysian state with a new outlet in Kelantan and aims for further expansion in underpenetrated East Coast and East Malaysia regions. Recent successful promotions like the “Everyday Value Zone” and extended operating hours are also contributing positively to sales.

Risks and Recommendation

Potential downside risks include reputational or brand challenges, intense market competition, and an unforeseen sharp rise in operating expenses. A structural shift in consumer preferences also remains a consideration.

Despite these risks, TA SECURITIES has reiterated its ‘BUY’ recommendation for the retailer. The investment bank has set a target price of RM0.25, representing a 25.0% upside from its last traded price of RM0.20.