A STAGGERING 60% slash in target price to RM1.50 (from RM2.40 previously) and a downgrade to “hold” (from “buy” previously) is what CGS-CIMB deemed fit to accord Mr D.I.Y. Group (M) Bhd as lower growth expectations abound.
Despite posting a decent 1Q FY2023 results, the research house is wary whether the region’s largest home improvement retailer can cope with slower demand for consumer goods on weaker spending power amid inflationary pressures.
“Moreover, there’s a tweak in its new store format from a fixed-priced MR DOLLAR (RM2 or RM5-priced products) to one offering a wider range of products priced under RM10 that may not necessarily resonate well with its originally targeted customer profile,” opined analyst Khoo Zhen Ye in a company update,
“This could lead to short-term downward pressure on sales momentum. The impact of minimum wage hikes continues to be a near-term earnings dampener as well. As such, we trim our FY2023-FY2024F EPS (earnings per share) estimates by 3.9%-9.4% to account for the above uncertainties.”
Following CGS-CIMB Research’s latest downgrade, Mr DIY’s consensus ratings now stand at 11 “buys”, one “hold” and two “sells”.
Nevertheless, CGS-CIMB Research described Mr DIY’s 1Q FY2023 core net profit of RM127.6 mil (+27% yoy), released Thursday (May 11) as within both its and Bloomberg consensus’ at 22% of FY2023F estimates.
Its 1Q FY2023 revenue rose 15.6% year-on-year (yoy), mainly driven by a higher store count of 1,125 (+178 net new stores; +18.8% yoy) and larger transaction volume of 38.2 million (+18.3% yoy vs 32.3 million in 1Q FY2022).
Looking back, yesterday’s (May 12) closing price of Mr DIY at RM1.60 is a pale shadow of its peak at RM4.20 posted on April 5, 2021 (a depreciation of 62%) during which private equity firm Creador – via Hyptis Ltd – held a 15.3% stake in Mr DIY when the group was listed on Bursa Malaysia in October 2020.
On Feb 22, Creador ceased to be a substantial shareholder in the group after it offloaded a further 65 million shares or a 0.69% stake to bring down its deemed interest to 4.93%.
On April 10, Mr DIY’s largest shareholder, Bee Family Ltd, raised its shareholding in the group by another 0.23% or 21.7 million shares which raises the latter’s stake in Mr DIY to 50.99% from 50.76%.
More recently, Mr DIY has rolled out a new international hardware brand EMTOP with its maiden store opened on April 24 at Bandar Puteri Puchong in Selangor.
Trusted in 80 countries across the world, EMTOP produces more than 1,000 hardware products that range from power tools to power tool accessories and power source tools that use a standard battery. – May 13, 2023
