· Food retail transformation reshapes the Group's long-term earnings profile.
· Giant Mini provides a scalable platform to build recurring consumer earnings.
· Integrated supply chain creates structural margin expansion opportunities.
· Successful execution could drive a consumer sector valuation re-rating.
Key Investment Highlights
A structural transformation from aquaculture to integrated food retail. XL Holdings has undergone a significant transformation over the past five years, shifting from a niche ornamental fish breeder into a diversified food group. Food-related operations now contribute over 95% of group revenue, underpinned by food manufacturing, agriculture and distribution. The acquisition of Giant Mini further strengthens the Group's downstream presence, positioning XL to capture value across the food supply chain rather than relying solely on upstream production. We believe XL should increasingly be valued as a consumer retail company rather than an aquaculture producer.
Giant Mini establishes an immediate downstream distribution platform. The acquisition of 34 Giant Mini outlets provides XL with an immediate retail footprint and direct consumer access, eliminating the need for a greenfield rollout. Management plans to expand the network to 200 stores over the medium term, including approximately 50 new stores in FY27, while introducing a customer loyalty programme and expanding online fulfilment through potential partnerships with Grab and Lalamove. We believe these initiatives should strengthen customer retention, increase sales frequency and improve the group's omnichannel capabilities, supporting long-term revenue growth.
Vertical integration could drive structural margin expansion. Unlike conventional retailers, XL participates across the entire food value chain, from pineapple cultivation and food manufacturing to distribution and retail. This integrated model provides multiple opportunities to improve procurement efficiency, increase private-label penetration and optimise inventory management. Management also indicated that dry FMCG products typically generate 10–16% gross margins, suggesting further scope for margin expansion as product mix shifts towards higher-margin consumer products and store density improves.
A differentiated business model compared with listed retail peers. Unlike most listed retail peers that rely primarily on third-party suppliers, XL combines upstream agricultural production, food manufacturing, logistics and retail distribution within a single operating platform. We believe this integrated structure provides greater flexibility to introduce proprietary products, optimise procurement costs and improve supply chain efficiency. If successfully executed, XL could evolve into an integrated food platform rather than merely another convenience store operator, supporting stronger earnings quality over the longer term.
Execution remains the key investment debate. While the Foods segment contributed c.72% of FY26 revenue, it generated only RM0.7m of segment PBT, implying a margin of below 1%. In contrast, the Growing Crop segment remains the group's largest earnings contributor despite accounting for only 15% of revenue. This indicates that XL's downstream retail business is still in its investment phase. Going forward, we believe shareholder returns will depend less on the pace of new store openings and more on management's ability to improve store productivity, same-store sales growth, operating leverage and overall retail profitability.
Valuation. Applying a FY27F P/E of 28.7x, based on the FY27 sector average of selected consumer retail peers, we derive a fair value of RM1.08. Key risks: Slower-than-expected Giant Mini expansion, weaker same-store sales, margin pressure from intensifying competition, rising labour costs, and execution risk in integrating and scaling its retail operations.
Disclaimer
The report is for internal and private circulation only and shall not be reproduced either in part or otherwise without the prior written consent of Apex Securities Berhad. The opinions and information contained herein are based on available data believed to be reliable. It is not to be construed as an offer, invitation or solicitation to buy or sell the securities covered by this report.
Opinions, estimates and projections in this report constitute the current judgment of the author. They do not necessarily reflect the opinion of Apex Securities Berhad and are subject to change without notice. Apex Securities Berhad has no obligation to update, modify or amend this report or to otherwise notify a reader thereof in the event that any matter stated herein, or any opinion, projection, forecast or estimate set forth herein, changes or subsequently becomes inaccurate.
Apex Securities Berhad does not warrant the accuracy of anything stated herein in any manner whatsoever and no reliance upon such statement by anyone shall give rise to any claim whatsoever against Apex Securities Berhad. Apex Securities Berhad may from time to time have an interest in the company mentioned by this report. This report may not be reproduced, copied or circulated without the prior written approval of Apex Securities Berhad.
| Currency | Buy Rates (RM) | Sell Rates (RM) |
|---|---|---|
| USD | 4.028078 | 4.060496 |
| EUR | 4.729360 | 4.738927 |
| CNY | 0.601158 | 0.601778 |
| HKD | 0.513500 | 0.517628 |
| SGD | 3.169857 | 3.195407 |