KUALA LUMPUR: RHB research sees valuation rerating potential for MR DIY (M) Group Bhd's stock given its ability to capitalise on consumer spending and recent positive developments in the sector.
It views MR DIY as a beneficiary of the salary hike for civil servants come December 2024 and Employees Provident Fund (EPF) Akaun Fleksibel withdrawal scheme, as recipients of both proposals fall well within Mr DIY's customer demographic.
RHB research added that the relatively higher trading liquidity vs other large-cap consumer peers is also favourable to attract the interest of returning foreign investors.
RHB research has a 'Buy' call and a RM2.20, a share, target price for MR DIY.
The stock was trading at RM1.78 a share as at 11.02am.
The firm said Mr DIY's 13 per cent net profit growth of RM145 million accounted for 23 per cent of its own and consensus forecasts – in line with the seasonal patterns observed.
In a research report today, it said the retailer's profit growth will persist due to substantial expansion of outlets to reach more markets and its strong brand reputation, which is supported by its efficient business strategy.
"The strong cash flow generation coupled with normalisation of inventory turnover and capex should sustain the high dividend payout ratio," it said.
"Notwithstanding the cautious consumer spending on the back of heightened inflationary pressures, the company is well-positioned to benefit from any consumer downtrading given its value-for-money product offering and convenient locations," the firm said.