AMINVEST KEEPS 'BUY' CALL ON MR DIY WITH HIGHER FAIR VALUE ON POTENTIAL FBM KLCI ENTRY

KUALA LUMPUR, April 15-- AmInvestment Bank Bhd (AmInvest) has maintained its “buy” call on MR D.I.Y. Group (M) Bhd (MR DIY) with a higher fair value of RM4.48 per share compared with RM3.80 previously on the stock's potential inclusion into the FTSE Bursa Malaysia KLCI (FBM KLCI).

Maintaining its “buy” call, AmInvest said it remained optimistic on the home improvement retailer’s future earnings outlook given MR DIY's unrivalled gross profit margins of 43 per cent, expansion into less urban areas and quick store breakeven periods of less than two years, as well as the expected success of its multi-store format.

“Also, a recovery in pandemic restrictions will improve footfall and the transaction volume of high-margin stationery and sports equipment items,” the investment bank said in a research note today.

AmInvest also retained its forecast of a 52 per cent sales growth for MR DIY for the financial year ending Dec 31, 2021 (FY21), underpinned by the expected opening of 100 MR DIY stores, 25 MR TOY stores and 50 MR DOLLAR stores in FY21.

“So far, MR TOY has seen improvements in basket size, experiencing a 33 per cent year-on-year increase by end-2020,” it said.

AmInvest also said it was positive on MR DIY's intention to open a larger proportion of stores in remote areas, as such outlets had a 15 per cent to 20 per cent higher revenue contribution compared to their urban counterparts.

“In particular, MR DOLLAR’s direct competition will be the local mom-and-pop stores, which do not have the capital nor bargaining power to compete with the group’s lower priced goods.

“Chain discount retailers such as Daiso and AEON are more urban-curated, leaving MR DOLLAR unimpeded in its accumulation of market share in these locations,” it added.

In AmInvest's view, MR DIY’s performance for the first quarter of FY21 would only be mildly affected by the latest Movement Control Order as more than 95 per cent of the group’s outlets had remained open.

-- BERNAMA