PETALING JAYA: UOB Kay Hian Research (UOBKH Research) sees solid first quarter results of 2024 (1Q24) for MR DIY Group (M) Bhd
given the robust outlook for retail sales.
Citing Retail Group Malaysia (RGM), the research house said retail sales is expected to grow to 4% year-on-year in 2024, an increase from 2.2% in 2023.
“We believe this could bode well for MR DIY’s 1Q24 performance in terms of earnings delivery seeing that same-store sales growth (SSSG) could be resounding against a stable margin outlook,” the research house said
Additionally, RGM is forecasting growth of 7.1% in 1Q24, driven by festivities and school holidays.
UOBKH Research added that possible catalysts for retail sales growth stem from government cash handouts, foreign-currency strength and visa-free entry for visitors from China which may boost tourism spending.
The home-improvement retailer is launching its 55th MR DIY Plus store, boasting 28,000 sq ft of floor area and 20,000 different types of goods at IPC Shopping Centre.
UOBKH Research said, “On average, MR DIY Plus stores generates 80% higher SSSG relative to the usual bread-and-butter MR DIY stores.”
The research house maintained its “buy” call on the stock with a target price of RM2.10 and an upside of 40.9%.
Although consumer sentiment remains delicate due to concerns over the high cost of living, MR DIY should be among the best places to navigate such headwinds given its leadership in the low-cost segment, the research house added.
A significant mitigating factor to fragile consumer sentiment could be the introduction of Employees Provident Fund’s (EPF) Account 3, which allows for flexible withdrawal, UOBKH Research said.
“During the EPF’s special withdrawals during the pandemic and government cash handouts, MR DIY had been a standout beneficiary,” the research firm noted,
UOBKH Research said: “Despite being a large cap, MR DIY continues to offer an attractive three-year profit compounded annual growth rate of 15.8%.”
However, the research house said there is a potential FBM KLCI Index exclusion risk for MR DIY.
According to UOBKH Research, Sunway Bhd appears to be poised for an inclusion into the FBM KLCI Index given its 25th position by market capitalisation.
“Should Sunway maintain its 25th position by market capitalisation, whichever is lower in market capitalisation between MR DIY or AMMB Holdings Bhd or potentially another component would then be excluded from the FBM KLCI Index.”
