RHB Research anticipates a stronger fourth quarter for MR DIY.
PETALING JAYA: The immediate outlook for MR DIY Group (M) Bhd
is bright, underpinned by its strong year-on-year financial performance for the nine months ended Sept 30, 2023, according to analysts.
RHB Research said the home improvement retailer’s nine-month net profit of RM402mil has met 71% of the consensus full-year expectations.
It anticipates a stronger fourth quarter (4Q23) ahead for MR DIY, in line with the historical seasonal patterns.
The research house said revenue for the group over the nine-month period rose 10% to RM3.2bil, primarily driven by contributions from 123 new stores opened so far this year.
“Meanwhile, gross profit margin expanded by 4.7 percentage points to 45.2%, thanks to receding freight costs and average selling price adjustments.
“That said, the gain was offset by the higher operating expenditure which had increased by 26%, outpacing top line growth and store expansion – due to the higher minimum wages and soft consumer spending,” it said.
Comparing quarter to quarter, RHB Research said MR DIY’s 3Q23 revenue dipped 3% to RM1.1bil, in line with the weaker seasonality with the absence of major festivals and lengthy holidays.
Correspondingly, 3Q23 net profit fell 18% to RM124mil.
At the same time, Kenanga Investment Bank (KIB) Research highlighted that MR DIY had declared a dividend per share (DPS) of 0.8 sen for 3Q23, bringing the total DPS for the nine months to 2.2 sen or a 52% payout.
The research house said the group had raised the dividend policy to a minimum of 50%, up from the previous 40% and planned to reward shareholders with a quarterly dividend payout of 50% to 65%, in line with its increasing profitability.
It said the retailer is also in line with its target of 180 store openings in 2023 for a total of 1,260 stores by the end of the year.
The company planned the opening of 180 new stores in 2024, primarily in underrepresented areas in Sabah and Sarawak due to high population density, offering potential for higher sales per store.
Notably, the research house said MR DIY had highlighted that for the financial year ending Dec 31, 2023 (FY23), a gross profit margin of 45% will be a new norm moving forward due to the stabilisation of freight charges.
“Moreover, the implementation of a warehouse automation plan is expected to improve throughput, increase picking accuracy, and optimise space utilisation.
“This initiative is targeted to result in annual net savings of around RM10mil, mainly from reductions in labour and warehouse rental costs,” said KIB Research.
CGS-CIMB Research said the management of MR DIY was holding a “cautious” outlook premised on weak consumer spending as the average basket spending size has dropped to RM25.50 in 3Q23 year-on-year from RM27 in 3Q22.
