Mr DIY gross sales stabilise, however life-style retail biz KKV stays a drag, says UOB Kay Hian

KUALA LUMPUR (June 26): MR DIY Group (M) Bhd’s (KL:MRDIY) same-store gross sales development seems to be stabilising and margins are anticipated to stay above final 12 months, though its KKV life-style retail enterprise continues to incur losses, in accordance with UOB Kay Hian.

In a notice dated Wednesday (June 24), the analysis home stated MR DIY’s gross margin is anticipated to ease from the report stage achieved within the first quarter, partly as a result of price-lock marketing campaign, however ought to stay above the corresponding interval final 12 months.

The retailer’s price-lock marketing campaign, launched in May, initially noticed a gradual response however gained traction in subsequent weeks.

Management remains to be assessing whether or not the marketing campaign can generate sufficient further gross sales to justify extending it past June.

With gross sales momentum broadly secure, UOB Kay Hian expects second-quarter earnings development to trace the ten.3% year-on-year improve recorded within the first quarter.

Supply-chain dangers additionally stay manageable regardless of the Middle East battle, supported by MR DIY’s stock buffers and its sourcing base in China, which accounts for about 70% of provides.

Freight prices, which rose quickly in March, have since normalised, whereas worth will increase from suppliers stay restricted, the analysis home stated.

However, the group’s KKV life-style retail format stays a drag on earnings, with its present 39-store community nonetheless loss-making on the earnings earlier than curiosity, taxes, depreciation and amortisation stage.

UOB Kay Hian stated KKV continues to face weak product-market match, restricted localisation and better third-party logistics prices, elevating doubts over whether or not its deliberate growth will be sustained over the medium time period.

In distinction, MR DIY’s core retailer format provides clearer development prospects, notably by way of its Plus shops, outlet refurbishments and growth in East Malaysia.

The analysis home stated refurbished shops have recorded gross sales will increase of between 5% and 10%, whereas some shops in East Malaysia are acting at as much as twice the conventional stage as a result of decrease competitors and market underpenetration.

MR DIY is focusing on round 120 new core shops and about 25 KKV shops, though UOB Kay Hian expects the group so as to add 155 web new shops this 12 months, based mostly on its historical past of exceeding growth targets.

The analysis home maintained its “buy” name and goal worth of RM2.30, implying an upside of almost 39% from the prevailing share worth of RM1.66.

It expects web revenue to rise about 14% to RM724 million in 2026, supported by retailer growth, secure margins and foreign-exchange features.

However, UOB Kay Hian cautioned {that a} weaker ringgit in opposition to the renminbi might weigh on 2027 earnings, as MR DIY doesn’t hedge its purchases and sources a big share of its items from China.

The analysis home estimated that each 1% depreciation of the ringgit in opposition to the renminbi might cut back 2027 earnings by about 2.2%.