AmInvestment Bank Research maintained a ‘buy’ rating on Mr DIY Group (M) Bhd and changed its target price to RM4.48 from RM3.80 after predicting the company would profit from a possible listing on Bursa Malaysia.
The research firm through its note said the fair value of Mr DIY’s shares is based on price to earnings (PE) of 38 times the earnings per share (EPS) of financial year 2023 (FY23).
AmInvestment is also optimistic about Mr DIY's future earnings prospects, given a gross profit margin of 43%, expansion into rural areas, a quick return on capital period of less than two years and the expected success of the 'multi-store' format.
"The relaxation of travel restrictions will also increase the number of customers and the transaction value of stationery and sports equipment," the firm said.
AmInvestment also maintained its sales growth forecast of 52% for financial year 2021 (FY21).
“The situation is expected to be supported by the opening of 100 Mr DIY branches, 25 Mr Toy branches and 50 Mr Dollar branches in FY21. So far, Mr Toy has shown an increase in sales, increasing by 33% year -on -year to RM40 by the end of 2020, ”he said.
AmInvestment is also positive about the company's intention to open a large number of branches in remote areas as it contributes 15-20% higher revenue than branches in urban areas.
Meanwhile, the firm believes the first quarter of financial year 2021 (1QFY21) will not be severely affected by the Movement Control Order (PKP) as more than 95% of branches remain open.
AmInvestment believes in stronger revenue from the stationery and sports equipment segment following the gradual easing of PKP restrictions and the reopening of school sessions.
“This segment produces the second highest gross profit margin of about 46%. We expect the segment to return to pre-pandemic levels of revenue of 10% after falling about 7% in financial year 2020 (FY20), ”the firm explained.
At 12.29, Mr DIY's shares fell two sen to RM4.19.
