Sslee blog

Author: Sslee   |   Latest post: Sun, 11 Apr 2021, 5:47 PM


MRDIY: Can Media and IB report be independent and free?

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Dear all,
Can any news media and IB report be independent and free?
John Swinton, former Chief of Staff of the most powerful and prestigious newspaper on earth, The New York Times, when asked to give a toast to the "free press" at the New York Press Club stated:
(1) John Swinton, speech in New York City (1880)
There is no such thing, at this stage of the world’s history in America, as an independent press. You know it and I know it. There is not one of you who dare write your honest opinions, and if you did, you know beforehand that it would never appear in print. I am paid weekly for keeping my honest opinions out of the paper I am connected with. Others of you are paid similar salaries for similar things, and any of you who would be foolish as to write honest opinions would be out on the streets looking for another job. If I allowed my honest opinions to appear in one issue of my papers, before twenty-four hours my occupation would be gone. The business of the journalist is to destroy the truth, to lie outright, to pervert, to vilify, to fawn at the feet of mammon, and to sell his country and his race for his daily bread. You know it and I know it, and what folly is this toasting an independent press? We are the jumping jacks, they pull the strings and we dance. Our talents, our possibilities and our lives are all the property of other men. *We are intellectual prostitutes*
The above speak 99.999% true for any news media and IB report claimed of “Independent and free press”
For example let’s examine what omission/commission or highlighted/ignored by free and independent media report on MRDIY:
PETALING JAYA: The RM1.5bil initial public offering (IPO) of Main Market-bound MR DIY Group (M) Bhd has been oversubscribed by retail investors as well as Malaysian and foreign institutional funds by 3.91 times.
The home improvement retailer’s IPO involves the offer of up to 941.49 million shares, with institutional investors taking up 779.96 million shares and the remaining 161.53 million shares going to retail investors.
“For the balloting in respect of the applications received from the Malaysian public, a total of 9,244 applications for 133.93 million issue shares with a value of RM214.29mil were received, representing an oversubscription of 0.07 times.
What is not highlight:
Retail investor balloting:
1 retail investor successful applied for 9 million shares (8.40%)
1 retail investor successful applied for 25 million shares (23.34%)
Can a retail investor have so much money to apply for 9 or 25 million shares?


(A) The total IPO offering is 941,490,000 shares or 15% stake on the enlarged number of shares post IPO, and the breakdown as follows:

  • 753,090,000 existing shares to be sold by existing shareholders to Institutional Investors. Existing shareholders are exiting around 12% of their pre-IPO stake, by offering 753,090,000 existing shares to Institutional Investors.
  • 188,400,000 new shares are issued to mostly Retail Investors (85.7% of the offering), with the IPO proceeds (RM301.4 million) being used to pare down borrowings (RM 276.1 million) and pay for IPO expenses (RM25.3 million).
  • This IPO is clearly more of an exit event for existing shareholders, than a fund raise for the next phase of growth
(B) 6 months share sale moratorium applicable for the remaining controlling stake held by the founder's family, via Bee Family Limited and:
  • Hyptis / Creador, remaining 15.2% stake (959,873 shares) post IPO can be sold of the market with the written consent of the Joint Book runners. (otherwise there is a 6 months restriction period post IPO)
  • Platinum Alphabet / Gan Choon Leng and Tan Gaik Hoon remaining 6.9% stake (433,842 shares) post IPO can be sold of the market with the written consent of the Joint Book runners (otherwise there is a 3 months restriction period post IPO)..
(C) Existing shareholders have paid themselves in favorable manner prior to the IPO.
  • RM90 million cash spent on purchasing MR D.I.Y. in Brunei, which consist of 4 stores. This was also partially funded by borrowings. This is equivalent to RM25 million per store. Compare that to the IPO pricing of RM14.9 million per store.
  • RM500 million in cash dividend was paid out to shareholders in the last financial year prior to the planned IPO. This dividend payout was partially funded by borrowings. That is a 5% dividend yield on the proposed IPO price of RM1.60.
  • Near to mid-term dividend payout will definitely not be of similar yield. IPO prospectus noted a dividend payout ratio of at least 40% of net profit (equivalent to RM93 million, based on LTM net profit).
  • Given an estimated Net Operating Cash of RM550 million and planned capex of at least RM150 million in 2021. Estimated 2021 FCF will be around RM400 million. These cash will most likely be conserved to invest into their technology-driven distribution center and warehousing facilities.
(D) A long list of related parties transactions and conflicts of interest were disclosed in the IPO prospectus.
  • A key one being, controlling shareholders hold controlling interest in entities for MR D.I.Y. branded retail operations elsewhere including Thailand, Singapore, Indonesia, Philippines, Cambodia, Laos, and more. They have also licensed the use of the brand to third party for retail operations in India.
  • These overseas operations are not consolidated into the current to-be-listed entity. The current to-be- listed entity only for MR DIY’ Malaysia and Brunei Business.
MDGM’s FY20 core PATAMI of RM349.9m (+6.8% YoY) was above both ours and consensus expectations at 107.6% and 111.0%, respectively. The positive results surprise was due to better-than-expected SSSG and lower-than-expected effective tax rate. After factoring in slightly higher SSSG, our FY21/22 forecasts are increased by 2.0%/1.5%. Along with the rolling over our valuation year to FY22 (from mid-FY22), our TP rises from RM3.33 to RM3.81 based on an unchanged 40x PE multiple. Maintain BUY.
What are the omission/commission or highlighted/ignored by IB?
Why using unchanged 40XPE?
What will be the total addressable market in Malaysia and Brunei?
What will be the terminal growth rate?
With only 161.53 million shares going to retail investors is the current shares price cornered by the institutional investors?
Among the notable institutional investors in MR DIY’s IPO exercise are BlackRock, JPMorgan Asset Management, Aberdeen Standard, AIA, FIL Investment Management and Pictet Asset Management.
So lesson learned: Never swallow hook, line & sinker what is portraying out there. The truth is far deeper than realized.
Thank you
PS: John Swinton died on 15th December, 1901. In his obituary, The New York Times claimed:
(2) The New York Times (16th December, 1901)
He was never afraid to speak what he believed boldly and unreservedly... It was his boast that he never, no matter what the ideas of his employers were, wrote a line contrary to his honest convictions as uttered on the stump... As a man of original ideas and of freedom from the trammels of conventionality, Swinton had many admirers, even among those whose convictions were wholly opposed to his own.
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  4 people like this.
Goldberg Very interesting article, looks like the Securities Commission must have received their allocation. Too many glaring "red flags" so to speak to close ones's eyes.

Of course our local media reports are hired not to highlight the suspicious related third party deals.

The IBs are only good at manipulation. They are also hired not to report the dodgy deals and often give absolutely rosy earnings prospects and assign unjustified high PEs especially when the are about to issue Call Warrants- I believe they have issued a number of MR DIY call warrants recently.

It's all about manipulation and the regulators closing both eyes or rather chooses to be blissfully ignorant.

Reporting the truth is sacrilegious, sad but true everywhere in the world - more so in Bolehland.
27/02/2021 12:38 AM
27/02/2021 12:44 AM
patrico8 My initial impression of Mr DIY upon listing, was its 'overvaluation'. But, lo and behold, it was heavily glossed over by funds and it's northward journey was impressive. MrDiy is the current darling in Bursa.
27/02/2021 6:48 PM
Philip ( buy what you understand) Am I the only one that saw the value in DIY? Obviously not. If you cannot see the value in DIY, then it is merely that you are a retail investor and do retail valuation of companies.

For those that are not simple retail investors. We know to look deeper.

18/03/2021 7:01 AM
Sslee Haha,
It is always great to have the top 30 shareholders controlling 70 -95% like QL and MRDIY.

The value was created by the big boys decision to push up the share price with IB report as cohort.

So congratulation to all retailers that able to see and managed to profit from this value creation.
18/03/2021 7:51 AM

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