PETALING JAYA: 7-Eleven Malaysia Holdings Bhd (SEM) remains in active discussions with the Ministry of Finance on its potential inclusion as a Sumbangan Asas Rahmah (Sara) retailer under the cash aid programme.

CIMB Securities Sdn Bhd, in a report, said SEM’s participation could broaden its reach to lower‑income consumers, support incremental footfall, and strengthen its value proposition amid ongoing cost‑of‑living support measures.

This follows the government’s recent announcement of another RM100 one‑off Sara disbursement to Malaysians aged 18 and above in early February.

“In our view, participation will be positive for SEM, albeit with limited effect as Saraspending will mainly be skewed towards essential-related items, where SEM has limited exposure,“ CIMB Securities analyst Walter Aw Lik Hsin said in the report.

Apart from that, CIMB Securities anticipates SEM to post a stronger top-line growth of +5.6% year-on-year (YoY) for FY26, primarily attributed to the group’s plan to add 100 new stores, as CIMB Securities forecasts 100 net new stores and convert 200 classic-format stores to the Café by 7-Eleven format, which offers higher average revenue per store.

“Although the accelerated expansion and format conversion plan may raise operating cost pressures, we expect headwinds to be partially offset by ongoing cost‑optimisation initiatives and a more profitable sales mix, underpinned by higher contributions from fresh food.”

CIMB Securities said SEM may also, where feasible, explore selective price adjustments to pass through part of the cost increases to consumers.

“Given SEM’s ongoing expansion and refurbishment plans as well as ongoing cost-optimisation initiatives, we anticipate a core net profit growth of +26.1% YoY in FY26,“ Aw said.

In the fourth quarter of 2025, SEM continued to scale up its Cafe by 7-Eleven format stores through new openings and refurbishment of existing classic 7-Eleven stores, adding a total of 323 stores (36.5% from new store openings, 63.5% from refurbishment of existing classic 7-Eleven stores), lifting the total Cafe by 7-Eleven outlet count to 859.

CIMB Securities noted that as of end-Q4 of 2025, Cafe by 7-Eleven stores constitute 31.4% of SEM’s total store count of 2,735 outlets, up from 17% at the end of Q4 FY24.

CIMB Securities pointed out that SEM further reaffirmed its full-year target of opening 100 new stores and refurbishing 200 existing classic-format stores into CAFé by 7-Eleven stores in 2026F, bringing expected total store count by end-2026 to 2,835 stores, up by 3.7% YoY.

Further, CIMB Securities said at its Q4 FY25 post-results briefing that SEM attributed its +8.6% YoY revenue growth in FY25 to the net addition of 132 new stores and positive same-store sales growth of 5%, driven by improved product awareness and marketing activities.

However, the bank-backed research firm said this was more than offset by a 10.5% YoY increase in operating expenses due to higher employee-related costs, higher advertising and promotional spending, increased fresh-food write-offs, higher utility costs, and longer operating hours, with about 90% of total stores operating 24 hours by the end of FY25.

CIMB Securities said this was further compounded by a larger proportion of the CAFe by 7-Eleven format (formerly 7-Cafe) – which typically incurs higher utility costs relative to the classic format – in its store mix.

Consequently, SEM’s Ebitda (earnings before interest, tax, depreciation and amortisation) margin slipped 1.5 pp YoY to 10.6% in FY25.

“With no material surprises from SEM’s Q4 FY25 briefing, we make no changes to our FY26-28 earnings forecasts and maintain our Reduce call on SEM with an unchanged target price of RM1.50, anchored to 27x 2027 price-to-earnings ratio, in line with its 10‑year forward mean,“ the securities firm said.

“Despite no material surprises from the Q4 FY25 briefing, we view the stock’s current valuation of 42.6x 2026 P/E as unwarranted, trading at about 0.75 standard deviation above its 5‑year mean. This is premised on our view that SEM’s long-term outlook is challenging given intensifying industry competition, rising operating cost pressures, and low stock liquidity.

“Upside risks include stronger‑than‑expected sales and lower‑than‑expected operating costs,“ Aw said in the report.

 The Sun Malaysia