MR DIY Group (M) Bhd – the most successful initial public offering (IPO) for 2020 – has continued to dazzle investors with its fine run.
Debuted on the Main Market of Bursa Malaysia on Oct 26 last year amid a COVID-19 ravaged economy, MR DIY’s listing which raised RM1.5 bil was touted as the largest in three years and the only listing to surpass the billion-ringgit threshold in 2020.
From its IPO price of RM1.60, MR DIY has saw its share price “close to tripling” after touching an all-time high of RM4.38 on April 7.
Optimistic about its stellar future earnings outlook, AmBank Research has raised the target price of Malaysia’s largest home improvement retailer by almost 18% to RM4.48 (from RM3.80 previously) while maintaining its “buy” rating.
“(This is) given its unrivalled gross profit margins of circa 43%, expansion into less urban areas, quick store breakeven periods of within two years and expected success of its multi-store format,” the research house pointed out in a company update.
“Also, a recovery in pandemic restrictions will improve footfall and the transaction volume of high-margin stationery and sports equipment items.”
AmBank Research further maintained MR DIY’s sales growth at 52% for FY2021F. This is expected to be underpinned by the opening of 100 MR DIY stores, 25 MR TOY stores and 50 MR DOLLAR stores during the current financial year.
“So far, MR TOY has seen improvements in basket size, experiencing a 33% year-on-year (yoy) increase to RM40 by end-2020,” observed the research house.
AmBank Research is also positive on news that the group intends to open a larger proportion of its stores in remote areas given such outlets can generate 15%–20% more revenue from their urban counterparts.
“In particular, MR DOLLAR’s direct competition will be against local mom-and-pop stores which do not have the capital nor bargaining power to compete with the group’s lower priced goods,” justified the research house.
“Chain discount retailers such as Daiso and AEON are more urban-curated, leaving MR DOLLAR unimpeded in its accumulation of market share in these locations.”
Above all else, MR DIY’s 1Q FY2021 performance will only be mildly affected by the latest implementation of movement control order (MCO 2.0).
“More than 95% of the group’s outlets remained opened,” projected AmBank Research.
“On the flip side, the group has seen a lower volume of transactions during the MCO as result of lower footfall. Some mitigation may come in the form of a higher basket size as customers aim to make less trips.”
At the close of today’s morning session, MR DIY was down 1 sen or 0.24% to RM4.19 with 8.56 million shares traded, thus valuing the company at RM26.3 bil. – April 15, 2021
