Mr D.I.Y’s impressive run continues; the sky seems to be the limit (for now)

NOBODY had expected Mr D.I.Y. Group (M) Bhd to be where it is today when the company was listed on Bursa Malaysia on Oct 26 last year.

But in a matter of less than four months, the home improvement retail store chain has proven its critic wrong with its share price consistently scaling new highs.

Despite the re-imposition of the conditional movement control order (CMCO) in November last year, Mr D.I.Y still managed to record a 4.2% same store sales growth (SSSG) growth in its 4Q FY2020 which in CSG-CIMB Research’s view, is underpinned by strong demand for its products given its attractive pricing model.

“(Its) 4Q FY2020 core net profit remained strong (+27% year-on-year [yoy]; flattish quarter-on-quarter [qoq]) as Mr D.I.Y’s cost control execution led to stable margins on a yoy and qoq basis,” noted analyst Syazwan Aiman Sobri in a financial results review.

According to CSG-CIMB Research, Mr D.I.Y posted a core net profit of RM349.4 mil (+10.3% year-on-year [yoy]) for its FY2020, excluding exceptional items such as RM12.7 mil in listing expenses of which RM8.9 mil was recorded in 4Q FY2020 alone.

While the ongoing MCO 2.0 which came to force on Jan 13 may negatively impact footfall in the company’s 1Q FY2021F, Syazwan opines that the impact is unlikely to be severe as only less than 2% of its total store base was temporarily closed.

“Gross margin pressure could also arise from higher logistics costs due to heightened freight rates,” projected CGS-CIMB Research.

“Nonetheless we are still penciling in circa 39% core net profit growth in FY2021F as we expect cost pressure to ease in 2H FY2021F with average revenue per store to gradually recover to pre-pandemic levels by end-FY2021F in line with the gradual roll-out of the COVID-19 vaccine in Malaysia.”

All-in, the research house maintained its “add” call on Mr DIY with a higher target price of RM3.95, justified by Mr DIY’s:

  • Solid execution track record;
  • Resilient growth outlook despite challenges to the retail sector; and
  • Potential inclusion into benchmark indices (FBM KLCI and MSCI) which could further rerate the stock.

“(The) downside risks include (i) weaker-than-expected sales; (ii) higher-than-expected operational costs; and (iii) tightening of movement restrictions beyond 1Q FY2021,” added CGS-CIMB Research.

Elsewhere, Hong Leong IB (HLIB) Research is equally impressed with Mr D.I.Y’s ability to surpass its target of opening at least 132 retail outlets with 141 stores (104 Mr D.I.Y, 23 Mr TOY AND 14 Mr DOLLAR) during its FY2020.

“Going into FY2021, we expect Mr D.I.Y to continue to expand its outlet count aggressively with a further 175 outlet openings (100 Mr D.I.Y, 25 Mr TOY and 50 Mr DOLLAR),” projected analyst Gan Huan Wen.

“We expect Mr D.I.Y to ramp up its e-commerce efforts as the group shared its intention to gradually invest in warehouse automation.”

HLIB Research retained its “buy” rating on Mr D.I.Y by rising the company’s target price to RM3.81 (from RM3.33 previously).

At 10.15am, Mr D.I.Y was up 21 sen or 6.16% to RM3.62 (an all-time high) with 2.93 million shares traded, thus valuing the company at RM22.72 bil. – Feb 18, 2021

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