23 Nov 2021 | Value Investing Substack NEWS
Coopers Australia initiates position in Malaysia's MR DIY, Elizabeth Warren will vote against Powell's 2nd Term, U.S. to release oil from SPR, CNBC's full interview with John Malone
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We initiated a position in Mr DIY group (5296-MY), the largest discount retailer in Malaysia. From the humble beginnings of a single hardware store in downtown Kuala Lumpur in 2005, Mr. DIY grew to an impressive store base of over 800 stores and still opening stores fast. We had the rare opportunity of meeting its founder, Mr. Tan Yu Yeh (“YY”). He exudes passion, humility, joy and calmness, a classic ‘burning furnace’ that we love seeing in founders.
Offering customers good deals is a personal obsession of YY, and deeply ingrained in Mr. DIY’s culture. Its simple slogan says it all, “Always low prices”. Its products are often 15-20% cheaper than competitors. The company refused to raise prices even when its own costs went up – when GST was first implemented in Malaysia in 2015, Mr. DIY absorbed the additional costs rather than passing them on to customers. This proved to be ingenious – customers flocked to Mr. DIY and it became synonymous with ‘value for money’ in Malaysia.
The ability to keep costs down is key to a discount retailer and Mr. DIY is best in class at this. In order to procure the lowest possible prices, it establishes direct relationships with suppliers (cutting out the middlemen distributors), pays cash up-front and even rents out its idle trucks to suppliers. It also drives hard bargains on rent, often securing the most favourable lease terms in shopping malls.
Mr. DIY not only expands its existing store network, but also creates new store format and brands. Its smaller-format stores, Mr. DIY Express, are met with enthusiastic responses from smaller towns. Its new brands, Mr. Dollar and Mr. Toy, also saw some encouraging initial signs. We believe Mr. DIY can open 150-200 new stores per year over the next few years, with meaningful value latencies in both revenue and free cash flows generation.
SUBSTACKS + TWITTER:
News & Others:
- Structurally this is about underinvestment, releasing an SPR isn't the solution, this is about the Biden administration avoiding blame for inflation.
- Releasing so much sour crude from the SPR (50m barrels in Brent) isn't going to make a difference to benchmark WTI or Brent prices. High natural gas prices require sweet crude release for relief, this shows you how political this SPR release is rather than driven by fundamentals.
- Biden's Green Wave has continued to move companies away from investing in oil, which means underinvestment will continue to happen.