Mr DIY’s 4Q21 core PAT of RM135.0m (+50% QoQ, +15% YoY) brought FY21’s sum to RM431.8m (+24% YoY). This accounted for 101% and 99% of our and consensus forecasts. To date, Mr DIY has opened 166 net new stores and further expansion is in the pipeline with additional 180 stores targetted for FY22. We are encouraged with the improvement in the number of transactions and average basket following the normalisation of store operations. Additionally, the group strategy of clawing market share with price lock campaign has garnered positive feedback from the consumers. Maintain BUY, with TP of RM4.51 based on unchanged PE multiple of 50x pegged to FY22 EPS.

Within estimates. Mr DIY’s 4Q21 core PAT of RM135.0m (+50% QoQ, +15% YoY) brought FY21’s sum to RM431.8m (+24% YoY). This made up of 101% and 99% of our and consensus full year forecasts, respectively. Core PAT was arrived after adjusting for forex loss (+RM369k) and gain on disposal of PPE (-RM309k).

Dividend. Declared DPS of 0.9 sen which goes ex on 3 Mar 2022 (4Q20: 0.7 sen). FY21 dividend amounted to 2.95 sen per share (FY20:1.43 sen per share).

QoQ. Top line increased by +27% to RM975.4m in the absence of restrictions. Encouragingly, bottom line registered stronger growth of +50% QoQ to RM135.0m due to (i) higher sales; (ii) improvement in EBITDA margin by 1.3ppt; and (iii) lower effective tax rate of 24.9% (vs 3Q21: 27.2%).

YoY. Sales rose by +27% YoY attributable to (i) 23% increase in the number of stores to 900; (ii) encouraging higher average monthly sales per store (+4%); and (iii) higher basket size (+7%). Core PAT recorded a softer growth of +15.2% due to (i) EBITDA margin dilution by 0.1ppt from higher input cost, freight, higher revenue contribution from Mr Dollar and; (ii) higher effective tax rate of +0.9ppt. Note that Mr Dollar stores carry fixed price items of RM2 and RM5 that typically contribute smaller margins.

YTD. Despite the numerous hiccups with Covid-19 restriction throughout the year, the group recorded a top line growth of 31.8% to RM3.4bn. The growth stemmed from positive contributions from robust outlet expansion and higher average basket size (+10.5% YoY). Bottom line staged 24% improvement to RM431.8m.

Outlook. To date, Mr DIY has opened 166 net new stores (+62 in 4Q21) which majority constitute of stand-alone stores. With the healthy growth and payback period across the main brand the group target to open additional 180 stores in FY22 with emphasis on Mr DIY and Mr DIY Express. The expansion of Mr DIY Express new concept store acts as testament on the group’s agility an d 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. SSSG in 4Q21 stood healthily at 8.2%. We gather that the group strategy of clawing market share with price lock campaign in “Harga Kami Tetap Sama” has garnered positive feedback from the consumers. We opine that the group would able to defend its margin by ramping up its private label SKUs to leverage on its scale to negotiate for competitive pricing from suppliers.

Forecast. Unchanged.

Maintain BUY, with unchanged TP of RM4.51 based on 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 - 17 Feb 2022