Malaysia’s Mr DIY hammers down on growth in Indonesia with S$346 million IPO
It entered the Indonesian market in 2017 and has pursued an aggressive expansion strategy
[JAKARTA] Set to be the country’s biggest listing in more than a year, the Indonesian arm of Mr DIY – a Malaysian home improvement retailer with operations in Singapore – will debut on the Indonesian market on Thursday (Dec 19), marking a key milestone in the retailer’s ambitious South-east Asian expansion.
Mr DIY’s Indonesian unit, Daya Intiguna Yasa, aims to raise up to 4.2 trillion rupiah (S$346 million) in its initial public offering (IPO).
The company is targeting second-tier cities in Indonesia, leveraging its diverse range of home improvement and DIY products to capitalise on the growing middle class, despite subdued economic demand and the potential impact of the value-added tax (VAT) being raised next year.
The offering will consist of 2.52 billion shares, priced at 1,650 rupiah per share and slightly below the initial target of 4.7 trillion rupiah outlined in last week’s prospectus. Of the shares offered, some 2.27 billion will come from major shareholder Azara Alpina, while the remaining represent newly issued shares.
The IPO proceeds will be strategically allocated, with 60 per cent earmarked for debt repayment to Bank CIMB Niaga, 30 per cent for new store openings, and 10 per cent for operational working capital.
Mr DIY entered the Indonesian market in 2017 and has pursued an aggressive growth strategy, opening more than 500 new stores in the past two years alone, bringing its total to nearly 900 outlets.
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In 2020, the Malaysian group raised some US$363 million through an IPO on Bursa Malaysia to fuel its expansion.
Rural bet
The company plans to further expand by opening new stores in regions outside Java, including in Sumatra, Sulawesi, Kalimantan, Nusa Tenggara, Papua and the Maluku Islands.
This expansion aims to tap the growing middle class, fuelled by increasing economic activity in areas where commodities are the primary economic driver.
“We are well-positioned to capitalise on this momentum,” said Edwin Cheah, president-director of Daya Intiguna Yasa in a statement.
The Indonesian Retail Merchants Association indicated that the country’s non-grocery retail sector is expected to grow 8 per cent annually until 2028, driven by stable economic growth, rising minimum wage and ongoing urbanisation.
However, Indonesia’s retail industry is currently facing challenges due to the weakening purchasing power of the middle class, driven by stagnant incomes, interest rate hikes in recent years, and global economic volatility.
Vivi Handoyo Lie, head of investment at Stockbit Sekuritas, emphasised that consumer discretionary products, like those offered by Mr DIY, typically outpace basic consumer goods when purchasing power rises.
She noted that this segment is particularly sensitive to price increases, such as those driven by the rupiah’s depreciation amid global economic volatility. Risks such as the planned VAT hike in 2025 also loom large, although the government has stated that it will mainly target luxury goods.
“However, if commodity prices remain stable and economic growth outside Java and the Greater Jakarta area continues to outperform the national average, purchasing power in these regions should not be significantly impacted,” she continued.
Rapid expansion
Around 60 per cent of Mr DIY’s stores are situated outside of Java and the Greater Jakarta area, highlighting its strategic focus of tapping into cost-sensitive markets in Indonesia’s rural and non-urban areas.
Based on data from Frost & Sullivan, Mr DIY is the largest household goods retailer in Indonesia in terms of store count, surpassing even key competitors in the broader non-grocery retail sector.
Unlike many competitors that rely on the franchise model, Mr DIY takes full control by directly managing all of its stores.
Each store boasts an average of 18,000 stock-keeping units, offering a wide variety of products tailored to shifting consumer preferences.
Higher than its peers
Mr DIY’s prospectus stated that its price-to-earnings (P/E) ratio stood at 77.73 times and its price-to-book (P/B) ratio at 3.11 times as at Jun 30.
The company’s valuation outpaces that of its retail peers on the Indonesia Stock Exchange. For example, competitors such as Aspirasi Hidup Indonesia and Mitra Adiperkasa have a lower earnings multiple and book value multiple, indicating a more modest valuation.
Even Sumber Alfaria Trijaya, a supermarket chain with a higher P/E ratio, still has a lower P/B ratio than Mr DIY, highlighting the latter’s stronger market position. In the first half of 2024, Mr DIY’s revenue nearly doubled to 3.2 trillion rupiah, led by strong same-store sales growth of 11 per cent.
Oktavianus Audi, analyst at Kiwoom Sekuritas, highlighted that with robust same-store sales growth, Mr DIY now holds a solid competitive edge, even compared with its rivals.
“We think that Mr DIY will remain an attractive investment, with its core retail business benefiting from the potential for increased consumption, especially if the relaxation of interest rate policies continues,” he said.
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