An Overview of Mr. D.I.Y. Group Bhd

Mr. D.I.Y. Group Bhd, the largest home improvement retailer in Malaysia, continues to dominate with over 40% of the market share. Operating in Malaysia and Brunei, the company also manages toy and dollar concept stores. Presently trading at RM1.69 per share, the company has a target price of RM2.35, offering a substantial upside of 39.1%.

With its innovative store formats, including KKV and The Colorist brands, Mr. D.I.Y. is expanding its appeal to new demographics, especially the Gen Z and M40 segments. This diversification strategy ensures minimal cannibalization of its primary home improvement business.

Key Highlights of KKV and The Colorist

KKV: Lighting Up the Retail Scene

KKV, a lifestyle store brand from China, was introduced to the Malaysian market in 3Q24 after Mr. D.I.Y. acquired a non-controlling stake. The brand resembles the popular Miniso concept, offering colorful, playful, and lifestyle-oriented products. Customers are drawn to the visually engaging store designs, which seamlessly encourage impulse purchases. Additionally, the inclusion of F&B products acts as a strong anchor, boosting overall store spending. Impressively, all 10 KKV stores have already reached their breakeven point, with plans to roll out 20 more stores in 2025.

The Colorist: Beauty on a Budget

The Colorist, another sub-brand under Mr. D.I.Y., focuses on affordable cosmetics and personal care products. Its vibrant store design resonates with its target audience, leading to strong consumer engagement. Currently, both The Colorist stores are profitable, although there are no immediate expansion plans for this brand.

Tapping New Demographics

By targeting Gen Z and the M40 demographic, KKV and The Colorist expand Mr. D.I.Y.’s reach beyond its traditional customer base. This strategy effectively minimizes any potential overlap or cannibalization with its existing stores.

Potential for Future Growth

KKV’s parent company in China operates other sub-brands, such as X11, which focuses on toys. If The Colorist continues its success, Mr. D.I.Y. may consider introducing additional sub-brands under the KKV umbrella into the Malaysian market.

Financial Performance and Projections

The company forecasts a three-year profit CAGR of 10.2%, with substantial revenue and EBITDA growth. Key drivers include increased disposable income due to salary adjustments and in-store initiatives.

Market Sentiment and Challenges

High inflationary pressures have impacted consumer sentiment, particularly among middle-to-lower-income groups. However, broad salary adjustments, including a minimum wage increase to RM1,700 and civil servant salary hikes, are expected to inject RM20.4 billion into the economy. Combined with the EPF Account 3 withdrawal scheme, this liquidity boost could translate into improved household spending, benefiting Mr. D.I.Y.

The company is also leveraging promotional strategies, such as collaborations with local brands and purchase-with-purchase offers, to drive in-store traffic and enhance dollar spend per customer.

Favorable Forex Impact

With 70% of its cost of goods sold (COGS) imported from China, Mr. D.I.Y. stands to benefit from the strengthening of the ringgit against the renminbi. The current exchange rate of 0.6045 represents a 5% appreciation compared to the 2024 average. This currency advantage is expected to positively impact gross margins in 1Q25, given the company’s five-month inventory lag.

Environmental, Social, and Governance (ESG) Initiatives

Environmental

• Targeting a 30% increase in renewable energy sources for warehouses by 2030.
• Aiming to reduce Scope 1 and Scope 2 emissions by 20% and 30%, respectively, from the 2021 baseline.

Social

• Workforce gender diversity: 57% male and 43% female.
• Employment of 26 less-abled individuals and four Orang Asli employees.

Governance

• Board gender diversity: 4 male and 2 female members.
• 50% of the board comprises independent directors.

Valuation and Recommendation

UOB Kay Hian maintains a BUY recommendation for Mr. D.I.Y. Group Bhd, with a target price of RM2.35. The company’s attractive valuation, combined with its robust growth prospects and innovative strategies, positions it well for long-term success. Despite subdued market sentiment, its reward-to-risk profile remains compelling, trading below its historical valuation mean.