Shares of 7-Eleven Malaysia Holdings experienced a decline early on Monday following the announcement of a proposed sale of its stake in a pharmacy subsidiary. The stock fell by as much as 13% and was recently at 9.5% lower, resulting in 1.99 ringgit per share. This decrease has affected the company’s 12-month gains, bringing it down to 28%.
Late on Friday, 7-Eleven Malaysia revealed that one of its units has received a binding term sheet from BIG Pharmacy Healthcare regarding the acquisition of its entire 75% equity interest in Caring Pharmacy. The total amount for this transaction is MYR637.5 million ($139.8 million). Trading for 7-Eleven Malaysia shares was suspended on Friday and resumed on Monday morning.
It is important to note that the proposed acquisition by BIG Pharmacy Healthcare exclusively covers Caring’s pharmacy business in Malaysia, excluding its operations in Indonesia.
Maybank Investment Bank reacted to the announcement by downgrading 7-Eleven Malaysia’s rating from hold to sell. Despite this change, Maybank maintained the target price at MYR1.90. According to Maybank, while the sale of Caring may dilute its value, it is expected to have a neutral impact on 7-Eleven Malaysia’s earnings. Maybank analyst Jade Tam stated in a note that Caring’s first-quarter earnings contribution significantly dropped compared to the previous year due to sales normalization after the Covid-19 pandemic.
Although 7-Eleven Malaysia has not disclosed its plans for utilizing the proceeds from this transaction, Tam predicts that the company will prioritize its convenience-store business. Specifically, they expect a focus on converting more stores into the 7-Café format to improve the store product mix and attract higher traffic for its fresh-food offerings.