Eco-Shop poised for more growth after beating expectations
The group's core net profit rose 17 per cent to RM214 million on yearly basis, exceeding 105 per cent of RHB Research's full-year forecast.
Revenue grew 16 per cent to RM2.8 billion, supported by the addition of 74 net new stores during the year.
However, same-store sales growth dipped slightly by 0.4 per cent, with a sharper eight per cent decline in the fourth quarter following a price hike in April.
Despite a temporary dip in volume, GPM improved by 1.8 percentage points to 28.2 per cent, effectively offsetting the impact of increased operating costs, particularly from the higher national minimum wage.
RHB Research maintained its "Buy" call with a target price of RM1.51, implying a 12 per cent upside and a 2.0 per cent forecast dividend yield for financial year ending May 31, 2026.
The firm described Eco-Shop as a "scarce investment case" that offers earnings visibility and strong growth potential, supported by ongoing outlet expansion plans.
"Eco-Shop 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 same-store sales growth by leveraging on the elevated GPM," it added.
While sales volume has yet to fully recover following the April price increase, RHB Research said the dollar store model will remain attractive to value-conscious consumers once they adjust to the new pricing.
"On top of that, the group's participation in the Sumbangan Asas Rahmah programme, with 168 outlets approved and 81 stores enabled, could be another effective lever to lift foot traffic," it added.
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