MR DIY to expand further
Retailer plans to open 100 new stores each in FY20, FY21
PETALING JAYA: The expected recovery in consumer spending next year will put MR DIY Group (M) Bhd in good stead as the retailer continues to expand its network in the country.
Although already a market leader in a growing retail sector, Aminvestment Bank Research said MR DIY is positioned to increase its market share further through its aggressive expansion plan of opening 100 new stores each in financial year 2020 (FY20) and FY21.
Based on its revenue in the home improvement retail sector, MR DIY’S market share has grown to 29% in 2019 from 15% in 2016.
MR DIY has presence in Malaysia and Brunei. As at Sept 6, it operated 674 stores across the two countries with 670 stores in Malaysia and four stores in Brunei. In Malaysia, 644 stores are under the MR DIY brand, 24 stores under the MR TOY brand and two stores under the MR DOLLAR brand.
“MR DIY has shown tremendous growth in terms of revenue, expanding 44% from Rm1.2bil in FY17 to Rm1.8bil in FY18 and a further 29% to Rm2.3bil in FY19. We forecast further revenue growth with the exception of FY20 due to the Covid19 pandemic which resulted in the temporary closure of stores in March and April during the movement control order (MCO).
“We project MR DIY’S revenue to expand by 41% in FY21 and 22% in FY22,” Aminvestment said.
The research house initiated coverage on MR DIY with a “buy” recommendation and a fair value of RM2.94 per share.
Although it acknowledged that its valuations were on the premium side, Aminvestment said this was justified due to the group’s strong profit growth, expansionary business plans and established name recognition.
“We expect a normalisation of consumer spending patterns from FY21 onwards due to the easing of lockdowns and restrictions resulting from the Covid-19 pandemic in FY20. On the back of improved consumer sentiment, we also envisage higher spending per customer in FY21,” it added.
MR DIY has managed to keep its prices low due to its strong procurement process. Leveraging its economics of scale, MR DIY is able to negotiate for attractive terms from its end-suppliers while also riding on its strong brand name to negotiate for favourable terms in store rentals.
Due to a stringent procurement policy, MR DIY is able to offer customers a wide range of products, averaging 16,600 SKUS per store, covering a wide range of categories. This ensures that it caters to everyone. However, Aminvestment noted that there was a risk of prolonged movement restrictions.