KUALA LUMPUR (May 17): No analysts who track Mr DIY Group (M) Bhd have advised clients to sell the stock, although the home improvement retailer's latest quarterly earnings came in below some expectations.
Nonetheless, Mr DIY came under selling pressure on Tuesday. It fell 16 sen or 4.51% to RM3.39. Some attributed the selling to investors' reaction to the 19.5% drop in its net profit for the first quarter ended March 31, 2022 (1QFY22) to RM100.5 million from RM124.79 million a year ago, due to higher expenses as it opened more stores.
Quarterly revenue, however, climbed 4.02% to RM905.16 million from RM870.18 million a year ago, driven by contributions from new stores, the company said in a bourse filing.
It declared an interim single tier dividend of 0.7 sen per share (approximately RM44 million), representing a payout ratio of 43.8%, despite earnings contraction.
While analysts described the lower quarterly profit as an unexpected temporary blip or hiccup, they told investors to buy more shares simply because they foresaw better quarters ahead amid expectation of gradual recovery on profit margin.
Still, some quarters were surprised by the year-on-year drop in earnings given the low base effect.
HB Investment Bank analyst Soong Wei Siang maintained a "buy" call but with a slightly lower TP of RM4.50 from RM4.59 previously. Soong wrote that the two main factors dragging 1QFY22 performance are likely to dissipate in the upcoming quarters — considering the decline of Covid-19 infection rates and the end of the "Price Lock" campaign.
He said footfall is expected to normalise and the Aidilfitri festivities should further spur consumer spending whereas price adjustments are estimated to lift gross profit margin by two to three percentage points, according to management guidance.
Soong pointed out that higher minimum wage, effective May, will translate into higher wage costs, considering more than half of its 12,000 staff drew salaries below the new minimum wage.
"On the flipside, the resultant higher disposable income should also lead to higher consumer spending and the retail industry could well be one of the biggest beneficiaries.
"As such, the net impact on Mr DIY could be positive, taking into account its dominant market share in the home improvement retail industry," he said in a note.
Stock[MRDIY]: MR D.I.Y. GROUP (M) BERHADAnnouncement Date09-Jun-2022Reference NoENT-07062022-00001Corporate Action IDMY220607BONU0001Financial Year31-Dec-2022 SubjectBonus Issue TypeBonus Issue DescriptionBonus issue of up to 3,144,186,250 new ordinary shares in Mr D.I.Y. Group (M) Berhad ("MDGM") on the basis of 1 new ordinary share for every 2 existing ordinary shares in MDGM held at 5.00 p.m. on 23 June 2022 ("Entitlement Date")Amount1.0000 : 2.0000 Ex Date22-Jun-2022 Entitlement Date23-Jun-2022
Screwed up reason. As if all Malaysians have the skill to do DIY. They end up wasting money, destroying their property and end up calling contractor. How many have expertise in replacing toilet bowl? Don't promote just because you are stuck.
A glorified aircond hardware store with many outlets trading at PE 40. Just my opinion, it's just a hardware store that grew to many outlets during pandemic as electricians and handyman not able to travel from house to house for fixes. Was wondering how many screwdrivers, hammer,etc that customers can keep buying every month to support the revenue and profit.
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