The Daily Pulse of Bursa Malaysia

Valuation catch-up for MR DIY supports higher price trend

zaclim
Publish date: Mon, 06 Jan 2025, 08:24 AM
zaclim
0 244
Daily Pulse is a blog that provides daily stock updates and insights on the Bursa Malaysia.

Follow us in telegram for more daily discussion
https://t.me/xifuinvcommunity

MR DIY Group (M) Bhd experienced an unexpected decline in samestore sales growth in 3Q24, which triggered a knee-jerk selloff in its share price. But, a positive narrative of a stronger consumption outlook for 2025 has led to investors buying the dip.

Improved consumer sentiment is expected this year, driven by stronger disposable income. This would stem from the upcoming minimum wage hike, effective February 2025 and civil servant salary adjustments, which took effect in December 2024.

Private consumption growth is likely to continue rising, accelerating by 5.8% in 2025, up from 5.3% in 2024 and 4.7% in 2023. This is supported by MR DIY’s ambitious target of 190 new store openings for FY25, exceeding its usual range of 175–180. This includes management’s guidance of more than 20 new KKV stores in FY25, following their strong performance.

These large-format KKV stores, with an average size of 15,000 sqft compared to 10,000 sqft for regular MR DIY outlets, generate three times the average monthly revenue, mainly due to their higher priced product offerings.

The company is anticipated to generate earnings growth of 16% in FY25 versus FY24 estimate of 7.8% and the five-year historical average of 12.4%. The recent share price weakness presents a compelling opportunity for investors to buy the dip and position for the anticipated growth ahead.

At RM1.87, MR DIY is trading at an undemanding FY26 P/E of 25x, representing a 19% and 32% discount to its 5-year average of 31x and 99 Speed Mart Retail Holdings Bhd’s FY25 P/E of 37x.

Given MR DIY’s strong earnings growth trajectory, supported by improving disposable income trends, analysts believe the current valuation is unjustifiable.

There could be a valuation catch-up for MR DIY based on the significant valuation divergence between MR DIY and 99 Speed Mart, coupled with the discount to its historical average.

Related Stocks
More articles on The Daily Pulse of Bursa Malaysia
Bumper year for palm oil companies as prices remain elevated

Created by zaclim | Feb 13, 2025

Investors should consider putting their money in palm oil given the CPO prices, which should remain elevated. This should boost their bottomline and enable these planters to pay higher dividends

A busy year with more LSS packages being announced. Who are the beneficiaries?

Created by zaclim | Feb 12, 2025

In a surprising move, the ministry announced that the LSS6 programme will be up for bidding in the 2Q 2025. Solar companies will be eyeing for a slice of the quota in a bid to expand its business.

Johor’s special financial zone to boost local banks’ growth

Created by zaclim | Feb 12, 2025

The hype on the Forest City Special Financial Zone in Johor has garnered much attention. Which are the likely beneficiaries of the establishment of the zone?

Palm oil producers should step up efforts to increase productivity

Created by zaclim | Feb 10, 2025

It is the case of wanting to ride on the high crude oil prices but having limited amount of land for oil palm cultivation would impede the planters’ ability to maximise profits.

Shaky but stay selectively positive on tech stocks

Created by zaclim | Feb 07, 2025

It has been challenging for the technology sector with the US export curb and higher tariff imposed. What should investors do?

How the additional tariff imposed on China benefits Malaysian glove makers?

Created by zaclim | Feb 07, 2025

One man’s meat is another man’s poison. China is expected to see a drop in its glove exports to the US following the imposition of additional tariffs.

What to look out for in the recently published Petronas Activity Outlook

Created by zaclim | Feb 04, 2025

The oil & gas sector has been rather challenging as there were many uncertainties. However, there are silver linings where investors can make intelligent bets

Petrochemical sector continues face persistent challenges

Created by zaclim | Feb 03, 2025

It has been tough for petrochemical players as they are faced with oversupply issues. Will Petronas Chemicals and Lotte Chemical be able to stem the declining trend?

Opportunities amidst the DeepSeek impact

Created by zaclim | Feb 03, 2025

Hot off the shelves DeepSeek has been gaining traction, causing a frenzy in the AI world, dragging some US tech counters recently. What should investors look out for?

Time for the property sector to shine supported by mega projects?

Created by zaclim | Jan 28, 2025

Many investors would not be keen to invest in the depressing property counters as they are dragged by lockdowns and economic uncertainties. How will the sector fare going into 2025?

Discussions
Be the first to like this. Showing 0 of 0 comments

Post a Comment