Mr DIY in search of the next growth catalyst

Mr DIY Group (M) Bhd, Malaysia's largest home improvement retailer, is searching for a new growth catalyst amid mounting competition and the saturation of its store network. According to AmInvest Bank research, the firm's average revenue per store has been declining since FY2022, and its 1,610 outlets are nearing structural maturity, with same-store sales growth (SSSG) expected to turn negative.

This decline is attributed to the rise of e-commerce platforms like Shopee and TikTok Shop, which offer cheaper prices, as well as aggressive Chinese entrants like Pinduoduo and Taobao, and value retailers such as Eco-shop and Daiso. The firm's management aims to reach 2,000 stores by FY2028, which would result in an unprecedented store density.

However, the research house remains skeptical about the company's ability to manage cannibalisation from new openings effectively. Despite these challenges, AmInvest notes that the group's shift towards value-creation, including store-format refreshes and a selective expansion, is encouraging. This approach could lead to a disciplined capital allocation with a 100% payout ratio and a 5-6% dividend yield.

Currently, the stock is trading at RM1.52, with a target price of RM1.60, and the research house maintains a "hold" rating.