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Malaysia: Maybank IB maintains sell on 7-Eleven
KUALA LUMPUR: Maybank Investment Bank Research has maintained its “sell” rating on 7-Eleven Malaysia Holdings (SEM) with an unchanged target price of RM1.10.
The research house said SEM unveiled its “Back to Basics” exercise during its analyst briefing. It said more emphasis would be placed on cost efficiencies moving forward.
“With its newly announced ‘Back to Basics’ exercise, management’s key focus now is on cost efficiencies.
“On the supply chain side, SEM is looking to rejig its costs (eg. lower labour, warehousing and transportation costs) and also the possibility of upping centralised distribution dentre (CDC) charges to its suppliers,” Mank said.
At the store level, Maybank said SEM would be rolling out a revamped balanced scorecard and was looking to provide more on staff training.
Elsewhere, focus is still on driving fresh food sales and in-store services commission (est. 10%/3.5% of revenue, respectively).
SEM’s targeted store openings remains at 150 for FY17 (32 in 1Q17).
“While we acknowledge that SEM’s 18-month ‘Back to Basics’ exercise could benefit it in the medium term, execution is key and we await the delivery of results.
“Our forecasts are unchanged and currently impute 145 store openings per annum for FY17-19 and same store sales growth of -2.9%/+4.6% for FY17/18.
“Elsewhere, management has not shared its plans regarding its treasury shares. As of end-2016, SEM held 10% of its own shares (its share buyback limit), purchased at an average price of about RM1.54,” Maybank said.
Source: http://www.thestar.com.my/business/business-news/2017/07/27/maybank-ib-maintains-sell-on-7-eleven/#cdcfRRx4AS4xfUrD.99