MNHB: Retailer Surpasses Earnings Forecasts on Strong Margins, Positive Outlook

The retail group delivered a robust financial performance for the fiscal year ending October 2025, with core profit meeting and slightly exceeding analyst and consensus expectations. The results were driven by significant revenue growth and a sustained expansion in gross profit margins, leading the investment bank to reaffirm its “BUY” rating.

Performance Review

The company reported a core profit of MYR19.3 million for FY25, a substantial improvement from MYR12.5 million in FY24, satisfying 101% of the investment bank’s forecast and 99% of market consensus. Revenue for the year climbed to MYR879 million, marking a 9.3% year-on-year increase. This growth was primarily fueled by stronger in-store sales and the addition of 64 new outlets, bringing the total store count to 683 as of October 2025.

Despite a 15.8% year-on-year rise in selling and distribution costs, attributed to the SST expansion and minimum wage adjustments, the group successfully mitigated these pressures. Higher topline performance and a 2-percentage-point expansion in gross profit margin to 38.3% more than offset the increased costs. This margin improvement was a direct result of enhanced purchasing power, benefiting from the growing store network and improved SKU management. The company also declared two interim dividends totaling 1 sen for FY25, up from 0.5 sen in FY24.

Strategic Initiatives and Future Outlook

Looking ahead, the retail group is poised for continued growth through strategic store expansion and improved earnings across all its formats. The core convenience format remains a key earnings driver, with management focusing on adding stores in prime locations. Significantly, its CU convenience store format has achieved profitability and is expected to contribute meaningfully to earnings on a full-year basis in FY26. Plans to roll out CU in East Malaysia using a franchise model offer scalable growth prospects with reduced balance sheet risk.

The WHSmith segment, which contributes approximately 11% of group earnings, is projected to see a considerable boost from the anticipated increase in airport footfall, especially with the upcoming Visit Malaysia 2026 and the scheduled opening of six new outlets in KLIA1 by January 2026, which could lift segment earnings by an estimated 35%. The Supervalue format is also expected to benefit from higher Basic Rahmah Contribution (SARA) allocations. Collectively, higher volumes across all formats are anticipated to strengthen supplier bargaining power and support further gross profit margin expansion.

Analyst’s View and Key Risks

The investment bank maintains its “BUY” recommendation for the company, setting a DCF-derived target price of MYR0.80, which includes a 2% ESG premium and implies a c.22x FY26F P/E. This valuation reflects a positive outlook on the company’s strategic growth initiatives and operational efficiencies.

However, potential risks include higher-than-expected operating costs, possible delays in the turnaround of the CU format, and softer consumer sentiment. The investment bank noted that at 15.5x FY26F P/E, the stock trades below its pre-pandemic mean of 22-23x.