KUALA LUMPUR: RHB Investment Bank Bhd (RHB Research) has raised its target price for retailer Mr D.I.Y Group (M) Bhd to RM2.40 on its new retail brand, KKV, acting as a catalyst for its share price after the year-to-date rally.
Mr D.I.Y's share price has gone up 44 per cent year-to-date.
It was trading at RM2.09 earlier, giving it a market capitalisation of RM19.3 billion.
RHB Investment Bank Bhd (RHB Research) said the company's net profit of RM300 million in the 1H24 accounted for 47 per cent of its own and consensus forecasts, and the research firm expects a stronger 2H24 ahead on seasonal factors.
According to RHB Research, Mr D.I.Y's plan to open a new retail brand KKV could help to sustain longer-term earnings growth and expand return on equity (ROE).
"In addition, to its solid growth – notwithstanding the soft consumer sentiment, high trading liquidity and increased dividend payouts – should continue to garner investor interest," it said in a research note today.
Considering in the associate earnings from KKV, the firm raised Mr D.I.Y's earnings forecast for the financial year 2024 to 2026 (FY24-26) by 1.0 per cent, 3.0 per cent and 5.0 per cent.
Concurrently, it maintain a 'buy' call on the company.
Commenting further, RHB Research said Mr D.I.Y's earnings growth should continue to be anchored by its robust outlet expansion for deeper market penetration as well as the entrenched brand equity,thanks to its effective business model.
Meanwhile, the strong cash flow generation and normalisation of inventory turnover and capex should sustain its high dividend payout ratio of more than 70 per cent, it added.
"Notwithstanding the cautious consumer spending on the back of heightened inflationary pressures, Mr D.I.Y 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 positive developments including the salary hikes for civil servants and flexible Employees Provident Fund (EPF) withdrawal scheme – we think that the beneficiaries of both proposals fall well within its customer groups," RHB Research said.