MR DIY homes in on improvement

PETALING JAYA: Home improvement retailer MR DIY Group (M) Bhd (MR DIY), which is poised for the largest initial public offering this year, is looking to continue on its organic growth trajectory upon the listing of the company.

“We are focused on the local market which is considered a growth market for us.

“By focusing on this growth market, we expect to do well. We think the growth moving forward will be good, ” the home improvement retailer’s CEO Adrian Ong said at a virtual press conference yesterday.

“Independent market surveys indicate that this market will grow in the order of 10.2% from 2019 to 2024.

“We have executed very well into this growth market and we expect this to continue with regard to our performance, ” he added.

The company which sells hardware, household and furnishing, electrical, stationery & sports equipment, and other accessories is expected to be among the top 40 companies on Bursa Malaysia based on market capitalisation.

Ong said this growth will be supported by the addition of stores which will be done at a fast pace.

“We built this business with a very long-term outlook. As of Dec 2019, we had 593 stores and we are adding some 307 stores in the next two years across all of our different brands. “We have confidence in the long-term nature of our business, ” Ong said.

He said there might be some concerns or speed bumps in the short-term pertaining to the still developing Covid-19 pandemic.

“But overall, the outlook for us remains positive, ” Ong said.

The capital expenditures for a Mr DIY brand store would require RM1.6mil while the company’s other brands would require between RM1mil to RM1.2mil per store. The company’s store brands are Mr DIY, MR. TOY and MR. DOLLAR.

Ong said that same-store sales growth between 2017-2019 was up to 6.5%.

Meanwhile, he said the company had to postpone its IPO when Covid-19 first hit Malaysia in March.

“It made sense for us to postpone it then in the immediate term. But once we came out of the lockdown – with the resilience of our business and the continued growth – it made sense for us to come back to the stock market, ” he said.

Mr DIY said it will have a dividend policy that returns 40% of its earnings to shareholders.

A check on its factsheet revealed that the company had recorded a revenue of RM1.05bil in the first half of the financial year 2020 (FY20 ending Dec 31) and a net profit of RM115.44mil in the same first half period.

Based upon its enlarged issued shares upon listing on the Bursa Malaysia of 6.277 billion shares, earnings per share for the first half of FY20 would be at 1.839 sen per share.

Based on these figures, the indicative annualised price to earnings ratio for FY20 (based on the first half results) upon its listing would be 43.5 times.

The home improvement retailer will see its IPO comprising up to 941.49 million Mr DIY shares.

This comprises an offer for sale of up to 753.09 million existing shares and a public issue of 188.40 million new shares. This public listing will raise RM301.4mil for the company, of which RM276.1mil will be

used for the repayment of bank borrowings which will save the company RM15.2mil per year.

The remaining RM25.3mil will be used to defray the estimated listing expenses.

The company said in a press release that it will raise RM1.5bil from the market based on the initial retail price of RM1.60 per IPO share.

This translates to a market capitalisation of approximately RM10bil based on the enlarged share capital of the company.

The 941.49 million shares, which represents 15% of the enlarged issued 6.28 billion shares, will be allocated through a retail offering and an institutional offering.

The retail offering of 161.53 million shares and the institutional offering will see it sell up to 779.96 million shares, of which 470.75 million shares will be allocated to bumiputra investors approved by the MITI, it said.

Notable institutional investors to this exercise include: Aberdeen Standard, AIA, BlackRock, FIL Investment Management, JPMorgan Asset Management and Pictet Asset Management.

These cornerstone investors make up 76% of the institutional offering tranche, the company said.

Credit Suisse Securities (Malaysia) Sdn Bhd, Credit Suisse (Singapore) Limited, JPMorgan Securities (Malaysia) Sdn Bhd and J.P. Morgan Securities plc are joint global coordinators and joint bookrunners for this IPO.

UBS Securities Malaysia Sdn Bhd and UBS AG, Singapore branch are the joint bookrunners for this listing exercise.

While AmInvestment Bank, Hong Leong Investment Bank and Kenanga Investment Bank are the joint underwriters for this listing exercise.

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