KUALA LUMPUR, Aug 4 — AmInvestment Bank has maintained a ‘Buy’ call on home improvement retailer and mass merchandiser, MR DIY Group (M) Bhd, backed by its optimistic future growth and earnings potential, but with a reduced target price (TP) of RM4.06 from RM4.48 previously. 

The launch of new MR DIY Express format, profit-generating capacity of pre-existing stores in a post-pandemic scenario, proactive management team, and optimisation of product mix and stock keeping unit (SKU) prices are factors that showed the group is in good shape for the long haul, the investment bank said in a note.

In addition, the negative effects of pandemic disruption have already been priced in following a 20 per cent drop in its share price from the peak of RM4.25 on April 6, 2021, it said. 

In a separate note, RHB Investment Bank said investors should be focusing on the exciting 27 per cent three-year net profit compound annual growth rate (CAGR) on offer, a scarcity within the sector that is premised on a proven business model, established brand equity, and continuous expansion plans. 

“Going forward, we see sales rebounding progressively from the low in June as we understand that the trading limitations have been gradually relaxed in the third quarter of 2021. 

“As for expansion, the group has stood by its 175 net store addition target, assuming the limitations on construction and renovation works are lifted in September, but the store mix could be tweaked depending on the business environment,” said RHB.

The bank has also maintained its ’Buy’ call for the group with a new TP of RM4.41 per share from RM4.71 previously.

Beyond the near term, RHB believed that MR DIY would continue to chart robust earnings growth driven by its outlet expansion. 

With its entrenched network of stores throughout Malaysia, MR DIY would be a major proxy to capitalise on the recovery in consumer spending following the reopening of the economy post-mass vaccination.

Meanwhile, Maybank IB Research has upgraded MR DIY to a ‘Buy’ rating from ‘Hold’ previously with an unchanged TP of RM4.00 per share, with a 19 per cent return from its current market price of RM3.38. 

Although the group’s Q2 2021 results fell below its expectations mainly due to the full movement control order and higher input costs, Maybank turned positive on the group given its mass market appeal and expected earnings recovery once lockdown measures ease. 

However, with ongoing lockdown measures in Q3 2021, sequential earnings could remain subdued until the economy reopens closer to Q4 2021.

As at 11.04am, Mr DIY’s share price was flat at RM3.38 with 2.4 million shares changing hands. — Bernama