Eco-Shop Marketing (ECOSHOP MK): GPM Expansion Outweighs SSSG Disappointment; BUY
29 July 2025
Consumer Non-cyclical | Retail – Staples
Recommendation: Buy (Maintained)
Target Price (Return): MYR1.51 (+12%)
Price (Market Cap): MYR1.35 (USD1,834m)
- Maintain BUY and TP of MYR1.51, 12% upside and 2% FY26F (May) yield. Eco-Shop Marketing’s FY25 results beat our expectation on strong GPM expansion. We foresee the dollar store industry continue the rapid growth by capitalising on consumer downtrading trends thanks to the wide value-for-money product range. With this, ECOSHOP offers earnings visibility, and, at the same time, robust earnings growth fostered by outlet expansion plans to extend its dominant market share. Such scarce investment case should justify the premium valuation.
- FY25 results were above our expectation. Core net profit of MYR214m (+17% YoY) met 105% of our full-year forecasts due to stronger-than-expected GPM expansion. Post-results, we make no material changes to our earnings forecasts and introduce FY28F (+12%). Our DCF-derived TP remains at MYR1.51 (inclusive of a 4% ESG premium), which implies a 31x 2026F P/E, or at a premium to the sector average.
- Results review. YoY, FY25 revenue jumped 16% to MYR2.8bn – underpinned by 74 net new store additions with SSSG flattish at -0.4% (4QFY25: -8% following the April price increase). On a positive note, the price increase expanded FY25 GPM by 1.8ppts to 28.2%, more than offsetting the rise in opex stemming from higher minimum wages. Correspondingly, FY25 core net profit surged 17% to MYR214m. QoQ, 4QFY25 revenue dipped 6% to MYR689m after volume declined in reaction to the price increase. Consequently, 4QFY25 core net profit fell 9% to MYR57m as GPM expansion (1.5-month impact of price increase) was insufficient to offset the topline weakness and higher opex (full impact of higher minimum wages). In addition, MYR5m expenses were incurred in 4QFY25 to replace price tags, banners, billboards and etc.
- Capturing the untapped opportunities. ECOSHOP is focused on opening at least 70 new outlets pa in order to penetrate the underserved markets and consolidate its market leadership in the burgeoning dollar store industry. Meanwhile, it recently launched targeted marketing campaigns to drive footfall and SSSG by leveraging on the elevated GPM. Whilst volume has yet to recover fully following the price increase in April, we believe the model of dollar stores will continue to appeal to value-conscious consumers after acclimatising to the new pricing. On top of that, the group’s participation in the Sumbangan Asas Rahmah programme (168 outlets approved, 81 stores enabled) could be another effective lever to lift foot traffic.
- Risks to our recommendation include reputational risks, major delays in expansion plans and sharp spikes in input or operating costs.
Analyst
Soong Wei Siang
+603 2302 8130
soong.wei.siang@rhbgroup.com
Share Performance (%)
| YTD | 1m | 3m | 6m | 12m | |
|---|---|---|---|---|---|
| Absolute | 0.0 | 8.0 | 0.0 | 0.0 | 0.0 |
| Relative | 0.0 | 7.9 | 0.0 | 0.0 | 0.0 |
52-wk Price low/high (MYR): 1.13 – 1.35
Forecasts and Valuation
| May-24 | May-25 | May-26F | May-27F | May-28F | |
|---|---|---|---|---|---|
| Total turnover (MYRm) | 2,404 | 2,788 | 3,343 | 3,910 | 4,466 |
| Recurring net profit (MYRm) | 183 | 214 | 255 | 293 | 327 |
| Recurring net profit growth (%) | 73.8 | 17.0 | 19.4 | 14.8 | 11.5 |
| Recurring P/E (x) | 42.49 | 36.31 | 30.41 | 26.48 | 23.74 |
| P/B (x) | 14.0 | 7.8 | 6.9 | 6.1 | 5.4 |
| P/CF (x) | 45.95 | 24.29 | 19.16 | 17.29 | 15.08 |
| Dividend Yield (%) | 1.9 | 0.7 | 1.6 | 1.9 | 2.1 |
| EV/EBITDA (x) | 20.86 | 17.10 | 14.71 | 12.62 | 11.07 |
| Return on average equity (%) | 32.9 | 26.5 | 24.2 | 24.6 | 24.3 |
| Net debt to equity (%) | 5.3 | net cash | net cash | net cash | net cash |
Emissions And ESG
Overall ESG Score: 3.2 (out of 4)
- E Score: 3.0 (GOOD)
- S Score: 3.3 (EXCELLENT)
- G Score: 3.3 (EXCELLENT)
Avg Daily Turnover (MYR/USD): 23.7m/5.59m
Emissions (tCO2e)
| Trend analysis | May-23 | May-24 | May-25 | May-26 |
|---|---|---|---|---|
| na | ||||
| Scope 1 | – | – | – | – |
| Scope 2 | – | – | – | – |
| Scope 3 | – | – | – | – |
| Total emissions | na | na | na | na |
Latest ESG-Related Developments
Eco-Shop promotes energy efficiency through initiatives like LED lighting and passive building design at its Jementah Distribution Centre.
It enhances emissions management by optimising logistics routes and adding low-emission vehicles with AdBlue technology.
The group also supports waste reduction by eliminating plastic bags and complying with environmental regulations without any recorded breaches.
ESG Unbundled
Overall ESG Score: 3.2 (out of 4) – Last Updated: 24 July 2025
E Score: 3.0 (GOOD)
ECOSHOP promotes sustainability through energy-saving initiatives, efficient logistics with low-emission vehicles, and waste reduction efforts like eliminating plastic bags, all while complying with environmental regulations.
S Score: 3.3 (EXCELLENT)
ECOSHOP promotes inclusive hiring, continuous employee training, and workplace safety. It supports communities through CSR efforts, ensures product quality, and enhances customer experience through service excellence and loyalty programmes.
G Score: 3.3 (EXCELLENT)
ECOSHOP upholds strong governance through anti-corruption policies and MCCG compliance. It enhances supply chain efficiency via digital systems, prioritises local sourcing, and safeguards customer data through robust privacy measures.
ESG Rating History
Financial Exhibits
Company Profile
Eco-Shop Marketing is the largest dollar store chain in Malaysia, primarily engaged in retailing groceries and general consumer goods.
Key drivers
- Store expansion;
- Robust SSSG;
- Market share gains.
Key risks
- Major delay in expansion plans;
- Brand and reputation risk;
- Sharp rise in input cost.
Financial summary (MYR)
| May-24 | May-25 | May-26F | May-27F | May-28F | |
|---|---|---|---|---|---|
| Recurring EPS | 0.03 | 0.04 | 0.04 | 0.05 | 0.06 |
| DPS | 0.03 | 0.01 | 0.02 | 0.03 | 0.03 |
| BVPS | 0.10 | 0.17 | 0.19 | 0.22 | 0.25 |
| Return on average equity (%) | 32.9 | 26.5 | 24.2 | 24.6 | 24.3 |
Valuation metrics
| May-24 | May-25 | May-26F | May-27F | May-28F | |
|---|---|---|---|---|---|
| Recurring P/E (x) | 42.49 | 36.31 | 30.41 | 26.48 | 23.74 |
| P/B (x) | 14.0 | 7.8 | 6.9 | 6.1 | 5.4 |
| FCF Yield (%) | 1.1 | 2.6 | 1.0 | 3.9 | 4.7 |
| Dividend Yield (%) | 1.9 | 0.7 | 1.6 | 1.9 | 2.1 |
| EV/EBITDA (x) | 20.86 | 17.10 | 14.71 | 12.62 | 11.07 |
| EV/EBIT (x) | 28.87 | 23.83 | 20.51 | 17.75 | 15.73 |
Income statement (MYRm)
| May-24 | May-25 | May-26F | May-27F | May-28F | |
|---|---|---|---|---|---|
| Total turnover | 2,404 | 2,788 | 3,343 | 3,910 | 4,466 |
| Gross profit | 636 | 786 | 1,020 | 1,185 | 1,340 |
| EBITDA | 373 | 439 | 522 | 605 | 684 |
| Depreciation and amortisation | (103) | (124) | (148) | (175) | (203) |
| Operating profit | 269 | 315 | 374 | 430 | 481 |
| Net interest | (22) | (25) | (23) | (27) | (32) |
| Pre-tax profit | 242 | 281 | 351 | 403 | 449 |
| Taxation | (64) | (77) | (96) | (110) | (123) |
| Reported net profit | 177 | 204 | 255 | 293 | 327 |
| Recurring net profit | 183 | 214 | 255 | 293 | 327 |
Cash flow (MYRm)
| May-24 | May-25 | May-26F | May-27F | May-28F | |
|---|---|---|---|---|---|
| Change in working capital | (126) | (21) | (21) | (46) | (47) |
| Cash flow from operations | 169 | 319 | 405 | 449 | 514 |
| Capex | (83) | (118) | (331) | (146) | (152) |
| Cash flow from investing activities | (120) | (520) | (331) | (146) | (152) |
| Dividends paid | (150) | (150) | (128) | (146) | (163) |
| Cash flow from financing activities | (81) | 0 | (241) | (266) | (301) |
| Cash at beginning of period | 94 | 100 | 366 | 200 | 237 |
| Net change in cash | (32) | (200) | (167) | 37 | 61 |
| Ending balance cash | 62 | (100) | 200 | 237 | 298 |
Balance sheet (MYRm)
| May-24 | May-25 | May-26F | May-27F | May-28F | |
|---|---|---|---|---|---|
| Total cash and equivalents | 100 | 366 | 200 | 237 | 298 |
| Tangible fixed assets | 709 | 830 | 1,136 | 1,240 | 1,322 |
| Total investments | 11 | 11 | 11 | 11 | 11 |
| Total assets | 1,276 | 1,851 | 2,028 | 2,266 | 2,507 |
| Short-term debt | 129 | 124 | 124 | 124 | 124 |
| Total liabilities | 723 | 861 | 911 | 1,003 | 1,080 |
| Total equity | 552 | 990 | 1,117 | 1,264 | 1,427 |
| Total liabilities & equity | 1,276 | 1,851 | 2,028 | 2,266 | 2,507 |
Key metrics
| May-24 | May-25 | May-26F | May-27F | May-28F | |
|---|---|---|---|---|---|
| Revenue growth (%) | 20.8 | 16.0 | 19.9 | 17.0 | 14.2 |
| Recurrent EPS growth (%) | 73.8 | 17.0 | 19.4 | 14.8 | 11.5 |
| Gross margin (%) | 26.4 | 28.2 | 30.5 | 30.3 | 30.0 |
| Operating EBITDA margin (%) | 15.5 | 15.7 | 15.6 | 15.5 | 15.3 |
| Net profit margin (%) | 7.4 | 7.3 | 7.6 | 7.5 | 7.3 |
| Dividend payout ratio (%) | 84.6 | 28.1 | 50.0 | 50.0 | 50.0 |
| Capex/sales (%) | 3.4 | 4.2 | 9.9 | 3.7 | 3.4 |
| Interest cover (x) | 11.2 | 10.5 | 12.3 | 12.1 | 11.8 |
Results At a Glance
Figure 1: Results review
| FYE May (MYRm) | 4QFY24 | 3QFY25 | 4QFY25 | QoQ (%) | YoY (%) | FY24 | FY25 | YoY (%) | Comments |
|---|---|---|---|---|---|---|---|---|---|
| Revenue | 640.7 | 736.4 | 689.0 | (6.4) | 7.5 | 2,404.0 | 2,787.5 | 16.0 | Underpinned by net new store opening of 74 outlets; FY25 SSSG: -0.4% |
| Gross Profit | 174.5 | 206.2 | 220.1 | 6.7 | 26.1 | 635.5 | 786.4 | 23.8 | Strong expansion driven by price increase |
| GPM (%) | 27.2 | 28.0 | 31.9 | 3.9 | 4.7 | 26.4 | 28.2 | 1.8 | |
| Other income | 11.7 | 16.3 | 10.4 | (36.5) | (11.3) | 50.8 | 51.7 | 1.8 | QoQ fall due to the timing of the anniversary celebration |
| Opex | (94.1) | (131.1) | (155.4) | 18.5 | 65.1 | (422.2) | (532.6) | 26.1 | |
| Selling & distribution | (88.0) | (101.9) | (128.1) | 25.7 | 45.6 | (351.0) | (434.5) | 23.8 | In reflection of higher minimum wages |
| % of sales | 13.7 | 13.8 | 18.6 | 4.7 | 4.9 | 14.6 | 15.6 | 1.0 | |
| Admin | (6.2) | (29.2) | (27.4) | (6.3) | 341.5 | (71.2) | (98.1) | 37.7 | |
| % of sales | 1.0 | 4.0 | 4.0 | 0.0 | 3.0 | 3.0 | 3.5 | 0.6 | |
| Operating profit | 92.1 | 91.3 | 75.0 | (17.9) | (18.6) | 264.1 | 305.5 | 15.7 | |
| EBIT margin (%) | 14.4 | 12.4 | 10.9 | (1.5) | (3.5) | 11.0 | 11.0 | (0.0) | |
| Finance income | 0.7 | 1.2 | 0.9 | (22.9) | 26.2 | 2.5 | 5.2 | 109.0 | |
| Finance cost | (6.7) | (7.8) | (7.8) | 0.2 | 17.3 | (24.1) | (29.9) | 24.3 | |
| PBT | 86.2 | 84.8 | 68.2 | (19.6) | (20.9) | 241.7 | 280.9 | 16.2 | |
| Tax | (22.9) | (23.1) | (18.7) | (18.7) | (18.2) | (64.4) | (76.6) | 18.9 | |
| Effective tax rate (%) | 26.6 | 27.2 | 27.5 | 0.3 | 0.9 | 26.7 | 27.3 | 0.6 | |
| Net profit | 63.3 | 61.7 | 49.4 | (20.0) | (21.9) | 177.3 | 204.3 | 15.3 | |
| EI | (0.2) | (0.6) | (7.6) | (5.3) | (9.4) | Stripping off the IPO expenses | |||
| Core net profit | 63.4 | 62.3 | 57.0 | (8.5) | (10.1) | 182.5 | 213.7 | 17.1 | At 105% of our forecasts |
| Core net margin (%) | 9.9 | 8.5 | 8.3 | (0.2) | (1.6) | 7.6 | 7.7 | 0.1 | Declared DPS of 1 sen |
Figure 2: Ongoing “Sama Bantu” campaign
A promotional image shows that all F&B products are priced at MYR2.40 each during the “Sama Bantu” campaign period.
Figure 3: PWP promotion
A “Purchase With Purchase” (PWP) promotion allows customers to buy selected products for only MYR1 with a minimum spending of over MYR20 in one receipt.
Figure 4: Biscuits at promotional price
An in-store image displays various brands of biscuits on shelves, all marked with a promotional price of MYR 2.40.
Figure 5: Beverages at promotional price
An in-store image shows shelves stocked with various canned and bottled beverages, with price tags indicating a promotional price of MYR 2.40.
Recommendation Chart
| Date | Recommendation | Target Price | Price |
|---|---|---|---|
| 2025-07-25 | Buy | 1.51 | 1.31 |
RHB Guide to Investment Ratings
Buy: Share price may exceed 10% over the next 12 months
Trading Buy: Share price may exceed 15% over the next 3 months, however longer-term outlook remains uncertain
Neutral: Share price may fall within the range of +/- 10% over the next 12 months
Take Profit: Target price has been attained. Look to accumulate at lower levels
Sell: Share price may fall by more than 10% over the next 12 months
Not Rated: Stock is not within regular research coverage
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| Analyst | Company |
|---|---|
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