Sales stayed strong during pandemic
We observed that MR.DIY business was least affected during the pandemic, as its products are listed as essential items under the distributive trade category. Thus, its stores are deemed as “essential” during the lockdown and continued to operate normally. Postpandemic, Mr DIY business remains popular due to its focus on a large target audience.
Robust business model
With over 827 stores across Malaysia and Brunei, MR.DIY possesses a strong resilient economic model stores that sees more than 90% of its stores being profitable, with a track-record relatively short payback period of 2-years payback period for a new stores. The company enjoys extremely high ROE of 57% in FY20, and we forecast its ROE to stay above 30% for FY21-FY23F.
Sector in growing phase
We forecast MR.DIY’s earnings to grow at 10% CAGR from 2021- 2023F as it continues to capture the home improvement products market. The response by the government to swiftly vaccinate the population has allowed the country to enter endemic phase which would improve consumer confidence and spending.
Initiate BUY with TP RM4.10, a 12% upside
We initiate coverage on MR.DIY with TP of RM4.10 based on average FY22/23F EPS of 6.9sen and +0.5SD of 59.5x. We think our valuation is justified, judging from our intrinsic value estimate of RM4.20 if we cross-check using EV/ROIC valuation. Central to our investment thesis is the high number of its stores being profitable, and generating high rates of return, and hence, would garner a sustainable ROIC level of 31% over FY21-FY23f.
Source: BIMB Securities Research - 26 Oct 2021
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MRDIYCreated by kltrader | Aug 12, 2024
Created by kltrader | Aug 12, 2024
Created by kltrader | Aug 09, 2024
Created by kltrader | Aug 09, 2024