Mr DIY rises 6% on higher target prices, positive growth prospects

KUALA LUMPUR (Feb 18): Shares in Mr DIY Group (M) Bhd rose 6.16% at mid-morning today after analysts have raised their target prices (TPs) for the group, riding on the home improvement chain store operator’s growth prospects amidst disruptions.

At 10.02am, Mr DIY rose 21 sen to RM3.62 with 2.68 million shares done.

Yesterday, Mr DIY said it posted a 19% increase in net profit to RM108.27 million for its fourth quarter ended Dec 31, 2020, from RM90.89 million in the previous year’s corresponding quarter.

Revenue grew 25% to RM768.33 million from RM617.13 million, the home improvement chain store operator said.

The group attributed the increase in revenue to a rise in average monthly sales per store, as well as sales contribution from the 141 net new stores added during the year, an increase of about 24% from the previous year.

In line with the group’s policy of paying quarterly dividends, it also declared an interim dividend of 0.7 sen per share, payable on April 8. This will involve a total payout of RM43.9 million.

For the full year, net profit increased 6.2% to RM337.16 million, from RM317.57 million in FY19, while revenue grew 12.5% to RM2.56 billion from RM2.28 billion.

In separate reports today, HLIB Research and Credit Suisse have raised their TPs to RM3.81 (from RM3.33) and RM4.30 (from RM4) respectively.

HLIB’s Gan Huan Wen said amid the Covid-19 outbreak and various movement control order (MCO) restrictions in FY20, the research house is impressed that Mr DIY surpassed their target of opening at least 132 retail outlets, with 141 stores (104 Mr DIY, 23 Mr TOY, 14 Mr DOLLAR) opened in FY20.

“Going into FY21, we expect Mr DIY to continue to expand outlet count aggressively with a further 175 outlet openings (100 Mr DIY, 25 Mr TOY, 50 Mr DOLLAR),” he added.

Therefore, HLIB maintained a “buy” rating on the group and along with the rolling over of its valuation year to FY22 (from mid-FY22), the TP raised from RM3.33 to RM3.81 based on an unchanged 40 times PE multiple.

The research house also upgraded the group’s FY21/22 earnings forecast after factoring in slightly higher same-store sales growth (SSSG).

According to Gan, Mr DIY’s 4QFY20 core profit after tax of RM117.2 million (+2.6% q-o-q, +27.1% y-o-y) brought FY20’s sum to RM349.9 million (+6.8% y-o-y), which is above both house and consensus expectations at 107.6% and 111%, respectively.

The analyst pointed out that the positive results surprise was due to better-than-expected SSSG and lower-than-expected effective tax rate.

Core profit after tax and minority interests (PATAMI) was arrived at after one-off listing fees amounting to RM12.7 million.

Notably, Mr DIY’s declared dividend per share of 0.7 sen will go ex on March 11, 2021 which brought FY20 dividend per share to 2.2 sen.

Meanwhile in a separate note, Credit Suisse said it lifted FY21-23E earnings per share for Mr DIY by 2.6-4.3%.

“We forecast a 4.0% SSSG in FY21, and 3.0% each year over FY22-23. Our earnings forecasts culminate in a three-year earnings CAGR of 30%,” it said.

The research house maintained “outperform” on Mr DIY as the group reported 4Q20 normalised profit of RM117 million (+29% y-o-y and +3% q-o-q), helped by sales contribution from its new stores, higher average spend, as well as rental concession received from the mandatory closures during MCO.

According to Credit Suisse, Mr DIY’s cumulative normalised net profit in 2020 grew 9% y-o-y to RM346 million, which is commendable amidst the various lockdowns throughout the year.

It said the results made up 108% of street and 103% of the research house’s estimation.

Credit Suisse also noted that Mr DIY added 141 net new stores during the year which resulted in SSSG coming in at 4.4% in 2020 (vs 1.8% in 2019), helped by a stronger 2H.

Source: TheEdgeMarkets