Mr DIY’s 1Q21 core PAT of RM125.0m (+6.7% QoQ, >100% YoY) matched expectations. To date, Mr DIY has opened 54 new stores which made up 31% of the group target of 175 additional stores for FY21. Post annual report adjustments, our FY21/22 forecasts increase marginally by 1.9%/0.6%. Maintain BUY, with higher TP of RM4.79 (from RM3.81) based on higher PE multiple of 50x (from 40x) pegged to FY22 EPS. We opine higher multiple is justified given the steady growth trajectory in store additions coupled with the possible inclusion into the FBM KLCI index.

Within expectations. Mr DIY’s 1Q21 core PAT of RM125.0m (+6.7% QoQ, >100% YoY) matched expectations, accounting 26.8% and 24.9%, of ours and consensus full year forecasts, respectively. Core PAT was arrived after adjusting for forex loss (+RM12k) and gain on disposal of PPE (-RM189k).

Dividend. Declared DPS of 0.8 sen which goes ex on 20 May 2021.

QoQ. Despite the implementation of MCO2.0 from mid-Jan, turnover rose +13.3% mainly due to increase in store count of 54 from 734 to 788. Core PAT inched up by 6.7% owning to better sales but was moderated by higher effective tax rate (+2.9ppt).

YoY. Revenue staged a solid growth of +62.9% on the back of (i) increase in average monthly sales per store (+2.6%); and (ii) 25.5% increase in number of stores (from 628 to 788). Higher sales coupled with better EBIT margin (+2.7ppt) from rental concessions due to temporary store closure, led to core PAT rising >100%.

New stores on track. To date Mr DIY has opened 54 new stores which majority constitute of stand-alone stores. This made up 31% of the group target of 175 additional stores for FY21. We are encouraged by this strategy in light of the change in consumer behaviour in avoiding crowded shopping spaces in favour of the easily accesses stand-alone stores closer to home. Despite Covid-19 headwinds, we are impressed by the group’s resilience in maintaining growth trajectory with a steady pace of store additions.

E-commerce focus. Additionally with heighten focus on the Fourth Industrial Revolution (IR 4.0), the group has launched a 65k sqft robotic warehouse in Sri Kembangan as a strategic initiative to drive efficiencies and growth. The warehouse is equipped with 23 programmable robots that are able to fulfil online purchases faster resulting in a 200% increase in operational efficiency. Despite still in its nascent stage, we reckon this would provide a new avenue for growth as online shopping has become the new norm, spearheaded by the pandemic. Given Mr DIY’s competitive pricing but rather obscure locations of its stores (to get lower rental rates), we opine its online platform would be able to offer consumers the best of both pricing and convenience.

Forecast. We updated our model for FY20 audited accounts and introduce FY23 forecasts. Post annual report adjustments, our FY21/22 forecasts increase marginally by 1.9%/0.6%.

Maintain BUY, with higher TP of RM4.79 (from RM3.81) based on higher PE multiple of 50x (from 40x) pegged to FY22 EPS. With the encouraging start, we reckon Mr DIY will be able to surpass their target of 175 new stores in 2021 across three existing brands. Furthermore, based on the last closing price of 30 Apr 2021, the implied market capitalisation ranks Mr DIY as the 20th largest market cap company. We opine the premium is justified to account for the possible inclusion into the FBM KLCI index.

Source: Hong Leong Investment Bank Research - 3 May 2021