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June 27, 2017

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Easycard partnership expected to boost FamilyMart: Morgan Stanley

TAIPEI--FamilyMart (全家便利商店), Taiwan's second-largest convenience store chain, is expected to benefit from its partnership with contactless smart card system operator EasyCard Corp. (悠遊卡公司) to launch a rewards point system, according to financial services firm Morgan Stanley.

Terrence Cheng, a Taipei-based analyst with Morgan Stanley, said that EasyCard compatibility is likely to help boost consumer stickiness and small payments at the ubiquitous convenience stores because EasyCard has issued more than 47 million prepaid cards that area already widely used for public transportation. FamilyMart operates some 3,000 stores around Taiwan, making it second in number only to 7-Eleven.

Marriage of Convenience

"We expect FamilyMart to benefit from its collaboration with EasyCard in a bonus point platform that brings in more traffic to both accumulate points and redeem them," Cheng said in a research note last week.

Taiwan FamilyMart Co. and EasyCard teamed up earlier this year to develop the system to help shoppers earn and use reward points at FamilyMart, as well as making bill paying at the one-stop shops more convenient.

Cheng said he is optimistic about FamilyMart's improving execution and marketing strategy, evidenced by its 5-6 percent growth in same-store sales in the first half of 2014, compared with about 1 percent recorded by the market leader President Chain Store Corp. (統一超商), which operates 7-Eleven, the biggest convenience store chain in the country.

FamilyMart's development plans for China also provide "a long-term bright spot" given the chain's well-established image and ambition for expansion, the analyst said. He gave an "overweight" rating to the stock with a price target of NT$250 (US$8.35).

In contrast, President Chain Store was rated "underweight" with a NT$195 price target due to the limited user base of its in-house iCash prepaid cards, Cheng said.

Shares of FamilyMart had fallen 0.24 percent to NT$208 as of Monday's session in Taipei, while President Chain Store had leveled at NT$223.5.

Rice Pastries Make Difference

FamilyMart earler expected a 15 percent growth in sales of breads and baked goods thanks to the launch of prepackaged rice flour-based pastries.

FamilyMart said that its new products aim to provide the public with an alternative to already popular pastry products made from wheat flour. This is the third time the convenience store has cooperated with the Council of Agriculture (COA, 行政院農業委員會) to promote domestically grown produce.

The previous endeavors — baked sweet yams and fresh juices — were all very successful, Pan said, and the store hopes the new rice flour series can duplicate the good results.

FamilyMart is eyeing a bigger share of the baked goods market — estimated at NT$20 billion (US$663.2 million) annually — with the new products.

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