KUALA LUMPUR: Going by its latest set of financial results, MR DIY Group (M) Bhd
is on a growth path as it continues on its expansion plan to establish 180 new stores in 2024.
The wider reach will further increase its market penetration and entrenched brand equity, thanks to its effective business model, said RHB Research, which has a "buy" recommendation on the home improvement chain.
In its latest results review, the research firm raised its target price on MR DIY to RM2.40, from RM2.20, reflecting its higher earnings forecasts after factoring associate earnings from an investment in the KKV lifestyle store chain.
RHB said MR DIY is well-positioned to benefit from any consumer downtrading given its value-for-money product offerings and convenient locations.
"We also view Mr DIY as a major proxy to capitalise on recent positive developments including the salary hikes for civil servants and flexible Employees Provident Fund withdrawal scheme – we think that the beneficiaries of both proposals fall well within Mr DIY’s customer groups," it said.
RHB added that shareholders in MR DIY can also expect the high dividend payout ratio of above 70% to continue as the company's earnings is sustained by strong cash flow generation and normalisation of inventory turnover and capex.
Hong Leong Investment Bank (HLIB) Research, in its own report, rolled forward its valuation year to FY25 and increased its price-earnings assumption to 35x from 30x. It said this was to reflect its optimism in light of the disposal income boosters of a flexible EPF account and pay rise for civil servants.
It maintained its "buy" call and raised its target price to RM2.74 from RM2.11.
The research firm also noted in its report that KKV, which targets a young and trendy demographic, generates three times MR DIY's average monthly revenue due to the higher priced items at its stores.
"We view this move positively as it reflects the group commitment to innovation and meeting evolving consumer preferences," it said.
During the second quarter ended June 30, 2024, MR DIY posted a net profit of RM155.21mil, up from RM150.32mil in the year-ago quarter.
The group reported revenue of RM1.2bil against RM1.1bil in the comparative quarter while earnings per share rose to 1.64 sen from 1.59 sen in 2QFY23.
Over the cumulative six months period, the group's net profit rose to RM300.09mil from RM278.09mil in 1HFY23, while revenue climbed to RM2.34bil from RM2.15bil in the same period in 2023.
The board of directors declared a dividend of 1.2 sen per share representing a dividend payout of RM113.4mil and a record 73.1% of profit after tax.
This brings the year-to-date payout to 2.2 sen per share, or 69.3% of profit after tax.
