PETALING JAYA: 99 Speed Mart Retail Holdings Bhd made a stellar debut on the Main Market of Bursa Malaysia, opening at RM1.85 sen per share, a 20 sen bump above its initial public offering (IPO) price of RM1.65.
Having raised RM2.36bil through its IPO, 99 Speed Mart’s listing is Malaysia's largest in seven years.
UOB Kay Hian Research (UOBKH Research) said the convenience store operator’s market leader position backed by resilient underlying demand, a proven track record, and a highly cash-generative business model are its main growth drivers.
“99 Speed Mart holds a 40% and 11.6% market share of the mini-market sub-segment and broader grocery-based retail market in Malaysia. Both segments are valued at RM23bil and RM79.5bil respectively. Its closest rivals’ market share seem small in comparison. 99 Speed Mart is almost triple that of the closest competitor in the grocery-based retail market,” the research house said in an initiation report today.
UOBKH Research said 99 Speed Mart’s attractive value proposition, combined with its accessible, convenient locations and highly resilient foot traffic, translates into sticky demand.
“Same-store sales growth (SSSG) has averaged 6.6% over the past four years (2020 to 2023) as a result. Among Malaysian households, 99 Speed Mart is synonymous with affordably priced daily necessities of fast-moving consumer goods,” the research house said.
On a whole, UOBKH Research noted that Frost & Sullivan forecast that the mini-market chain sub-segment is poised for an attractive five-year (2023 to 2028) growth of 10%, based on their ability to cater to consumers’ need for convenience, accessibility and a modernised grocery purchasing experience (air conditioning and proper planogramming).
“This is notwithstanding potential further market share accretion as suggested by its track record (gaining 14.1ppt in market share over four years) and store under penetration in the East Coast region and East Malaysia,” the research firm said.
99 Speed Mart has the largest network of stores in the mini-market sub-segment with its 2,651-store count.
“Its next closest rivals such as Econsave, Bila-bila mart and Giant Mini are far behind with only 79, 55 and 39 stores respectively, or less than 3% of 99 Speed Mart’s store count,” the research house added.
UOBKH Research assigned a “buy” call for 99 Speed Mart with a target price of RM2.00 based on 30 times 2025 forecasted price-to-earnings ratio (PE). Given the group’s industry position and market capitalisation, the research house believes Mr DIY Group is a more direct comparable for 99 Speed Mart.
“We expect free cash flow to grow at a four-year compound annual growth rate (CAGR) (2022 to 2026) of 18.8%. This is supported by a trifecta of factors like store expansion and robust SSSG to fuel growth; its decent and stable operational profitability; and instant brand recognition, need-based demand and impressive non-operating income significantly reducing the store payback period to under two years from the usual three years,” UOBKH Research said.
Meanwhile, Hong Leong Investment Bank (HLIB) also initiated coverage on 99 Speed Mart, with a “buy” call and a target price of RM1.98 based on 30 times PE of the financial year 2025 (FY25) earnings.
“This PE implies a ~40% premium to 99 Speed Mart’s peers as we believe this is warranted on the back of its market leader position coupled with aggressive store expansion,” the research house said.
99 Speed Mart is committed to a 50% dividend payout policy, supported by robust free cash flow generation and a healthy balance sheet with a net cash position.
“Nevertheless, based on its IPO price, its dividend yield is relatively unattractive at 1.8%. We expect 99 Speed Mart to record FY23 to FY26 revenue and net profit CAGR of 13.1% and 15.8%, respectively. This projected growth will be driven by the opening of 250 retail outlets annually and stable SSSG of 2% per annum,” HLIB said.
