Outlook for Eco-Shop positive on higher margins

PETALING JAYA: Despite temporary same-store sales growth (SSSG) challenges, Eco-Shop Marketing Bhd’s earnings outlook remains positive, driven by higher operating margins and new store openings.

Maybank Investment Bank Research (Maybank IB), in a report, said the group’s latest core net profit of RM59mil for the first quarter of financial year 2026 (1Q26) – which rose 35% year-on-year and down 1% was quarter-on-quarter – was within expectations.

This made up 24% of the research house and 23% of consensus full-year earnings estimates.

The interim dividend of 0.5 sen declared reflected a dividend payout ratio of 49% – lower than the research house’s projected financial year 2026 (FY26) 60% assumption.

Eco-Shop has a total store count of 391 stores as of end-1Q26 (up 20 stores year-to-date), with 81 new stores approved to be opened in FY26 versus its new store opening target of over 70 stores over the next five years.

Maybank IB noted it has lifted the group’s earnings estimates by about 1% for FY26 and 4% each for FY27 and FY28 after adjusting assumptions for over 80 new stores per annum from over 70 stores per annum previously.

The SSSG has also been revised to down 5% in FY26 while an increase of 5% each forecasted for FY27 and FY28, respectively.

“The sequential earnings should progressively improve as sales volume trends normalise while gross profit margins remain stable,” it added.

Note that the one-off RM100 Sumbangan Asas Rahmah cash aid has amounted to just about RM1.5mil in sales thus far, it said.

The research house has kept a “buy” call on Eco-Shop with a higher target price of RM1.70.

This is based on an updated market-weighted calendar year 2026 domestic retail price earnings ratio average of 32 times versus 27 times previously.

Eco-Shop registered a 48.39% jump in bottomline in 1Q26, on the back of higher revenue and improved profit margins.