KUALA LUMPUR, RHB Investment Bank Bhd (RHB IB) has maintained its ‘buy’ call on MR D.I.Y. Group (M) Bhd (MR DIY) and raised the target price (TP) to RM2.40 from RM2.20.

In a research note, RHB IB highlighted the downside risks to this call, which include weaker-than-expected consumer sentiment and a sharp rise in operating costs.

RHB IB said MR DIY’s earnings growth is expected to remain robust, driven by its aggressive outlet expansion strategy, strong brand equity, and effective business model.

The investment bank added that MR DIY’s strong cash flow generation, along with the normalisation of inventory turnover and capital expenditure (capex), should sustain its high dividend payout ratio of approximately 70 per cent.

“Notwithstanding cautious consumer spending due to heightened inflationary pressures, MR DIY is well-positioned to benefit from any consumer downtrading, given its value-for-money product offerings and convenient locations.

“We also view MR DIY as a major proxy to capitalise on recent p
ositive developments, including the salary increase for civil servants and the flexible Employees Provident Fund withdrawal scheme. We believe that the beneficiaries of both proposals fall well within MR DIY’s customer base,” it said.

To date, MR DIY has opened 79 net new stores, the majority of which are under its core MR DIY brand.

This slightly lags, accounting for 44 per cent of the group’s target of 180 additional stores for the financial year 2024.

RHB IB also noted that the company’s new retail brand, KKV, could contribute to sustained long-term earnings growth and enhance return on equity, potentially acting as a catalyst for further share price appreciation after the year-to-date rally.

As of 10.32 am, MR DIY’s share price was down 1.0 sen at RM2.09, with 5.33 million shares traded.

Source: BERNAMA News Agency