Mr DIY’s 2Q21 core PAT of RM82.1m (-34.3% QoQ, +44.2% YoY) brought 1H21 sum to RM207.0m (+79.1% YoY). This missed expectations at 43.5% and 40.0% of our and consensus forecasts. To date, Mr DIY has opened 93 new stores which made up 53% of the group target of 175 additional stores for FY21. We lower our FY21/22/23 earnings forecasts by -10.4%/-5.8%/-5.7%, respectively to account for the prolonged Phase 1 restrictions. Maintain BUY, with lower TP of RM4.51 (from RM4.79) based on unchanged PE multiple of 50x pegged to FY22 EPS. We expect the steady store expansion and omni channel strategy (online, Touch ‘n Go collaboration) to shore up the company’ s profitability post easing of restrictions.

Below expectations. Mr DIY’s 2Q21 core PAT of RM82.1m (-34.3% QoQ, +44.2% YoY) brought 1H21’s sum to RM207.0m (+79.1% YoY). This missed expectations, accounting for 43.5% and 40.0%, of our and consensus full year forecasts, respectively. The deviation was from lower-than-expected revenue due to prolonged movement restrictions. Core PAT was arrived after adjusting for forex loss (+RM115k) and gain on disposal of PPE (-RM214k).

Dividend. Declared DPS of 0.6 sen which goes ex on 26 Aug 2021. 1H21 dividend amounted to 1.4sen per share.

QoQ. Turnover dipped by -12.7% on the back of Phase 1 enforcement in June. Core PAT on the other hand, declined further by -34.3% owning to softer sales coupled with weaker EBITDA margin (-3.2ppt) recorded. Note that the total transactions in 2Q21 declined by -10.4%.

YoY. Revenue staged a solid growth of +47.1% on the back of (i) 29.2% increase in the number of stores to 827; (ii) encouraging total transactions that grew by 65.7%; and (iii) low base effect from store closure during MCO1.0 last year. Subsequently, core PAT recorded a +44.2% improvement.

YTD. Strong sales momentum trickling from 1Q21 and contribution from new stores lifted top line growth by +55.1%. Consequently, bottom line was rose by a larger magnitude of +79.1% driven by lower finance cost from repayment of borrowing coupled with lower effective corporate tax rate -0.8ppt.

Outlook. To date, Mr DIY has opened 93 new stores (+39 in 2Q21) which majority constitute of stand-alone stores. This made up 53% of the group’s target of 175 additional stores for FY21. Additionally, the group has also introduced new concept store dubbed as Mr DIY Express mainly to cater to rural towns. Currently at 5 stores, Mr DIY Express is smaller in size, with products offerings curated based on needs and preferences of the local consumers. We are encouraged by this strategy in light of the change in consumer behaviour in avoiding crowded shopping spaces in favour of the easily-accessed stand-alone stores closer to home. The introduction of new concept store also acts as testament on the group’s agility and dynamism in this unprecedented retail environment.

Forecast. We lower our FY21/22/23 earnings forecasts by -10.4%/5.8%/5.7% respectively to account for the prolonged Phase 1 restrictions (particularly in Klang Valley).

Maintain BUY, with lower TP of RM4.51 (from RM4.79) based on unchanged PE multiple of 50x pegged to FY22 EPS. We expect the steady store expansion and omni channel strategy (online, Touch ‘n Go collaboration) to shore up the company’s profitability post easing of restrictions.

ESG update. The group continues to look for opportunities to contribute back to the communities. Some of the social outreach activities that the group has run include providing personal protective equipment (PPEs), protective vests and stationery products to various Vaccine Distribution Centres (PPVs) across the Klang Valley, equipping a number of Covid-19 Assessment Centres with oxygen tanks, food donations to support the efforts of NGOs and foodbanks, and delivering F&B care packages directly to families in need within the vicinity of selected stores throughout Peninsular Malaysia.

Source: Hong Leong Investment Bank Research - 6 Aug 2021