Mr DIY’s 3Q21 core PAT of RM89.8m (+9.4% QoQ, -21.4% YoY) brought 9M21’s sum to RM269.8m (+27.5% YoY). This is within expectations at 70% and 65% of our and consensus forecasts. To date, Mr DIY has opened 107 new stores and we gather that the group is on track to meet the 175 mark. We are encouraged with the improvement in the number of transactions and average basket following the normalisation of store operations. Additionally, the group is ramping up on its private label SKUs to leverage on its scale to negotiate for competitive pricing from suppliers. Maintain BUY, with TP of RM4.51 based on unchanged PE multiple of 50x pegged to FY22 EPS.

Within expectations. Mr DIY’s 3Q21 core PAT of RM89.8m (+9.4% QoQ, -21.4% YoY) brought 9M21’s sum to RM269.8m (+27.5% YoY). This account for 70% and 65% of our and consensus full year forecasts, respectively. We deem this to be in line as 4Q is a seasonally stronger quarter for the group. Historically, 9M19 and 9M20 accounted for 72% and 67% of the full year numbers. Core PAT was arrived after adjusting for forex loss (+RM757k) and gain on disposal of PPE (-RM271k).

Dividend. Declared DPS of 0.65 sen which goes ex on 29 Nov 2021. 9M21 dividend amounted to 2.05 sen per share.

QoQ. Revenue inched up by +1.1% to RM768.0m on the back of gradual recovery at the tail end of Sept 2021. Core PAT on the other hand, leaped further by +9.4% owning to sales improvement and increased in EBITDA margin (+1.2ppt) from the lower operating and administrative expenses.

YoY. Turnover increased by 3.8% on the back of (i) 22.2% increase in the number of stores to 841 and (ii) encouraging higher average basket size that grew by 12.2% which more than offset the 7.0% decline in total transactions. On the flipside, core PAT recorded a -21.4% decline owning to shrinking of EBITDA margin by -3.8ppt as the group continue to incur fixed operating expenses with prolong store closures.

YTD. The positive contributions from robust outlet expansion more than offset the impact of temporary store closures and lower foot traffic from lockdown measures in 2Q21 and 3Q21. All in all, sales momentum lifted top line growth by +33.9% to RM2.4bn. Consequently, bottom line staged 27.5% improvement to RM296.8m.

Outlook. To date, Mr DIY has opened 107 new stores (+14 in 3Q21) which majority constitute of stand-alone stores. We gather that the group is on track to achieve target of 175 new stores for FY21, with subsequent target of 180 additional stores in FY22 with emphasis to be for Mr DIY and Mr DIY Express. The expansion of Mr DIY Express new concept store acts as testament on the group’s agility and dynamism in this unprecedented retail environment. We are encouraged with the improvement in the number of transactions and average basket following the normalisation of store operations. Additionally, the group is ramping up on its private label SKUs to leverage on its scale to negotiate for competiti ve pricing from suppliers. As more sectors of the economy are allowed to open, we remain optimistic on pent-up demand premised on normalization of social activities coupled with stable margins from higher portion of private label product mix.

Forecast. Unchanged.

Maintain BUY, with TP of RM4.51 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 in line with the clearer recovery picture.

Source: Hong Leong Investment Bank Research - 3 Nov 2021