MARC Ratings has affirmed its AA- rating on 7-Eleven Malaysia Holdings Berhad’s (7-Eleven Holdings) RM600.0 million Medium-Term Notes (MTN) Programme with a stable outlook. The outstanding under the programme stood at RM500.0 million as of May 11, 2022.
The group’s established market position and strong operating track record in the domestic convenience store segment (7-Eleven Malaysia Sdn Bhd), and growing prospects for its pharmacy retail segment (Caring Pharmacy Group Berhad) are key rating drivers.
In 2021, group revenue grew 10.6% y-o-y to RM2.8 billion with the improvement supported by contribution from its pharmacy operations offsetting the sales decline in the convenience store segment that had been impacted by pandemic-induced restrictions during the period. Group operating profit margin improved to 5.5% (2020: 4.6%), benefiting from higher margin pharmacy business and cost management strategy. Going forward, the group plans to expand by an additional 20-25 Caring Pharmacy outlets in the near term from the current 191 outlets. Caring Pharmacy had added outlets in 2021 through the acquisition of The Pill House Pharmacy Sdn Bhd (operates Georgetown Pharmacy) and Wellings Pharmacy Sdn Bhd (operates Wellings).
In respect of the domestic convenience store segment, 7-Eleven Malaysia continued to command strong market share in terms of store count, with an extensive reach nationwide. 7-Eleven Malaysia will resume net store expansion after a lull in 2021 due to the pandemic when it recorded a net increase of 14. It has earmarked 100 new stores in 2022. The expansion is expected to be funded internally. Group borrowings stood at RM640.2 million, translating to a moderate debt-to-equity ratio of 0.42x (2020: RM533.1 million; 0.35x), adjusted to exclude the reorganisation deficit of RM1.3 billion upon listing in 2014. Cash flow from operations interest and debt coverages were 5.59x and 0.18x, while cash balance stood at RM199.5 million as at end-2021.