Mr. DIY’s growth tapers off

Mr. DIY, Malaysia's biggest home improvement store, will see its revenue growth tapering off as it slows down the pace of its new store openings, according to analysts who follow the company's planned initial public offering (IPO). They note that new stores have been the main driver of the company's revenue growth. Now that Mr. DIY holds 25.4 per cent of the home improvement market in Malaysia and has branches in every state and territory of the country, there is less room for the company to expand its presence, they add.
The growth in new stores net of closures had already decelerated to three per cent in 2018 from 69 per cent in 2017, Equity Capital Markets' Arun George, SmartKarma Insight Provider, writes in a research note.
In August 2019, Mr. DIY Malaysia operated 548 stores in its home country and in Brunei (March 2020: 566 in Malaysia, four in Brunei). It had plans to open 135 new stores in Malaysia by the end of 2019. In 2018, it opened 113 new stores, and in 2017, 110 branches. This year, the company plans to open 100 outlets through internal funds.
"We forecast that the growth in new stores (net of store closures) will turn negative in 2020. Consequently, all things being equal, we would expect the growth in revenue from stores to continue to decelerate due to declining growth in the number of stores," George writes in the research note.

Mr. DIY's revenues have grown by 46.3 per cent annually from MYR 827.5 mio (Malaysian ringgit, EUR 174.33 mio) in 2016 to MYR 1.771 bn (EUR 379.81 mio) in 2018. George notes that revenue from store growth declined from 48.6 per cent in 2017 to 32.7 per cent in the eight months ending in August 2019.
But the slowdown in store openings and the impact this would have on revenue growth are not a cause for concern. In an interview, Zhen Zhou Toh, partner at Singapore-based Aequitas Research, told DIY International that a slowdown in expansion was "expected". "Revenue growth will continue to decelerate. But they still have some room to capture even more market share," he said.
Mr. DIY's same store sales are also growing at "relatively stable and healthy levels", George notes. From a tepid 0.9 per cent rise in 2016, same-store sales growth went up by 6.5 per cent in 2017 and 4.6 per cent from January to…