Stock prices have reflected the outlook, convenience store sector's valuation is too high.

(Kuala Lumpur, 18th News) In recent years, our country's convenience store sector has seen a variety of developments, with bright growth prospects. However, analysts consider the valuation has become high, hence maintaining a 'neutral' rating.

According to the latest report from LC International Investment Banking Research, the convenience store sector in our country is fiercely competitive, dominated mainly by large chain convenience store brands, while many small chain stores and independent shops operating locally in various states also participate.

Analysts explain that these stores classified in the convenience store sector all have significant characteristics. Compared with other retailers such as supermarkets and mini-marts, they have longer operating hours to meet consumers' needs at any time.

In terms of the number of stores, 7-Eleven convenience stores still lead the industry with 2,581 stores in operation.

With the rapid development in the convenience store sector, competition among various players intensifies. They have adopted a key innovative measure, focusing on supplying higher-margin fresh food products, with an overall margin of about 35%, to boost revenue and profit growth.

According to analysts' observations, fresh food sales account for approximately 30% to 50% of revenue in stores primarily focused on this category, but only 5% to 10% of revenue in traditional stores.

Looking ahead, analysts believe that with the urbanization trend in our country and the increase in disposable income, the demand for convenience among the public continues to rise. Major chain convenience stores are actively expanding with healthy new stores, indicating a bright growth outlook in this industry.

It is reported that 7-Eleven convenience stores, Mynews convenience stores, and FamilyMart plan to add 60 to 100 new stores in the 2024 fiscal year, with a year-on-year growth ranging from 4% to 16%.

Consulting firm Frost & Sullivan predicts that the compound annual growth rate (CAGR) in the convenience store sector will be 13.4% between 2023 and 2027, while the growth rate in other retail sectors, mainly groceries, will range from 3.2% to 5.3%.

In addition, analysts expect that the third-party payments of the Housing Provident Fund and the salary increase for civil servants from December will further boost consumer spending in the short term.

Despite the quite optimistic outlook, analysts believe that the valuations of these companies operating convenience stores are already quite high, possibly reflecting the anticipated growth potential.