Mr D.I.Y is the largest home improvement retailer in Malaysia with a 38.5% share of the home improvement retail market as at 31 December 2021. The motto is “ALWAYS LOW PRICES” which means they offer products at an attractive price to quality ratio. This means for a given price, the best quality you can get or for a given quality, the best price you can find. The stores carry a wide variety of products, with an average of SKUs across 5 main categories of products 18,000 including the own white label products to cater to the home improvement needs of every Malaysian. In FY2021, the company has 900 STORE supported by 12,500 employees of which 90% are Malaysians.

The company has about 40% gross margins for the last 3 years as compared to 34.47% in the industry. (Source: CSI market.com) due to the company deal directly with the suppliers, eliminating middlemen, they also manage their own distribution network, which serves to keep distribution costs low. I guess there is one more reason that the company does not mention in the annual report is that the company has given favourable terms to the suppliers, most of the times the company has paid cash directly to the suppliers and get favourable discounts from the products. Other home improvement businesses pay the suppliers 1 month or few months later, (e.g. Home Depot 43 days). Although the company has kept the stocks about 4 months on average before it sells to the clients, it does not affect the company free cash flow. The company has generated at least 200million free cash flow a year for the last 4 years. Due to all these reasons, the company has strong ROE, at least 30% a year.

The company has strong growth over the last 4 years, on average the revenue has grown about 20 percent a year, net income 15% a year. The company has opened about 100 new stores every year, from 354 in 2017 to 900 in 2021 at the average growth rate of 26%, and venturing into different businesses like Mr Dollar and Mr Toy. The company also produces white label products, this has been well-received by customers, reflected in the sales growth of white-label products from 17.2% in FY2020 to 38.7% in FY2021. Going forward, the Group will continue to evaluate the introduction of more such white-label products.

The current PE ratio of the company is 31 at the price of 1.58. if using PEG ratio with the growth of about 26%, this company seems to be slightly overvalued but the fundamental is very good. The dividend yield is about 1.1%, it is normal given that it is a strong growth company. What do you think about this company? Is it attractive to buy at 1.58?

Disclaimer: This information is intended for educational purposes only. It shall not be understood or construed as, financial advice. It is very important to do your own analysis before making any decision

If you like my analysis, please follow my page on facebook. you can click on my name, and click facebook icon. You can also send me an email at investingiscommonsense@gmail.com, i will give you my facebook page.

Regards,

Raymond Lim, CFA