PETALING JAYA: MR DIY Group Bhd’s growth prospects for its financial year 2025 (FY25) are expected to be supported by private consumption growth, despite a decline in same-store-sales growth (SSSG) recently.
CGS International Research (CGSI Research) said, while foot traffic and the number of transactions were stable year-on-year (y-o-y) in the third quarter of 2024 (3Q24), MR DIY’s management said that SSSG in the quarter declined about 2% due to sales per customer falling 2.4% to RM24.9.
The research house had expected the home-improvement retailer’s SSSG to be flat for the full year.
“While we adjust our FY24 SSSG assumption to reflect the 2% dip, we stay positive on MR DIY’s growth prospects in FY25 with our macro view of economic growth and private consumption being strong in 2025 stemming from the increase in the minimum wage, civil-servant wage hikes, and higher cash handouts to lower-income households.
“In addition, we think higher crude palm oil (CPO) prices bode well for consumption in suburban communities,” CGSI Research said in a report yesterday.
The research house added that MR DIY’s management was keeping its positive tone about its new lifestyle-retail and variety-store arm, KKV, citing good reception to new rollouts, higher sales per square foot and per customer than the MR DIY brand.
MR DIY acquired a 49% stake in KKV in May. KKV is one of China’s largest lifestyle retailers, offering over 20,000 types of lifestyle products in its Malaysian stores.
“With its product range attracting customers below the age of 35, we stay positive on this store format tapping into a higher level of consumer discretionary spending,” the research house said.
Moreover, CGSI Research said MR DIY’s management guided for at least 20 KKV store openings in 2025, and the launch of a new concept store to be trialled under the KKV banner called “The Colourist”, focusing on beauty and cosmetic offerings.
“With MR DIY’s experience in rolling out retail stores and ability to negotiate leases, we think the group should be able to roll out 50 KKV stores a year including The Colourist and other sub-brands in FY25 to FY26,” the research house said.
CGSI Research cut its FY24, FY25 and FY26 core earnings per share (EPS) estimates for MR DIY by 7.9%, 2.1% and 1.6%, respectively, and pencilled in a core EPS compound annual growth rate of 24% for FY23 to FY26 after the 3Q24 results briefing last week.
The research house reiterated its “add” call for MR DIY with a target price of RM2.60 and said it continues to remain positive about MR DIY’s growth trajectory, driven by its focused store-expansion plans and growth of new store formats.
MR DIY announced a 3Q24 dividend per share (DPS) of one sen (3Q23: 0.8 sen), bringing the DPS for the nine-month period to September (9M24) to 3.2 sen, which represented a 9M24 payout of 72% of net profit.
“This is above management’s target payout of about 50% to 65%, supported by its net cash position of RM77mil as of Sept 30, and healthy operating cashflow. We assume payout ratios of 70% in FY24 to FY26,” the research house said.
