99 Speed Mart jumps 14% in market debut following Malaysia's ...

[KUALA LUMPUR] Shares of Malaysian mini-market chain 99 Speed Mart Retail Holdings rose nearly 14 per cent on their first day of trading on Monday (Sep 9), following the company’s completion of the country’s largest initial public offering (IPO) since Lotte Chemical Titan’s debut in 2017.

At the closing on Monday, 99 Speed Mart’s share price ended at RM1.88, a 13.9 per cent or 23 sen premium over its IPO price of RM1.65 per share, with 421.9 million shares changing hands. At its peak, the stock rose over 15 per cent, hitting a high of RM1.91.

The RM2.3 billion IPO, priced at RM1.65 per share, valued the company at around RM16 billion (S$4.8 billion), based on its issued capital of 8.4 billion shares. The IPO was oversubscribed more than three times.

The nearly RM2.4 billion raised included RM1.7 billion from an offer for sale of over a billion shares by the founder and chief executive Lee Thiam Wah and his wife Ng Lee Tieng, who is also the non-independent non-executive director of the company.

The public issue of 400 million new shares raised up to RM660 million; 59 per cent of the proceeds will be channelled into expanding the company’s network of outlets, 15 per cent towards new distribution centres, 8.3 per cent for purchasing delivery trucks, and 7.2 per cent to upgrade existing stores.

The strong debut of 99 Speed Mart, which operates over 2,650 stores nationwide under the slogan Near N’ Save reflects investor optimism in Malaysia’s consumer sector and growth potential.

The listing attracted 14 cornerstone investors, including Abrdn Asia and UOB Asset Management (Malaysia).

Founded by entrepreneur Lee in 1987, 99 Speed Mart plans to expand its network to 3,000 outlets by end-2025. The company’s focus on convenience and accessibility has given it a leading market position, creating a significant barrier to entry for competitors.

Lee, a child polio survivor and now wheelchair-bound, has an estimated net worth of around US$3.3 billion, making him Malaysia’s newest billionaire on Bloomberg’s Billionaires Index.

99 Speed Mart’s debut marked the 34th IPO in Bursa Malaysia this year, points to the progress the exchange is making towards its target of hosting 42 listings for this year. It also solidifies Malaysia’s position as the most active IPO market in South-east Asia this year.

Between January and June, 21 companies were listed on the bourse, raising US$459 million, the highest among Asean bourses. Thailand was second with US$427 million; Indonesia, US$248 million; the Philippines, US$194 million; Vietnam, US$37 million; and Singapore with US$20 million.

Looking beyond domestic expansion, Albert Lee, the eldest son of, and also the alternate director to founder and chief executive officer Lee Thiam Wah, said the company remains open to opportunities to expand 99 Speed Mart to other countries.

“We have no firm plans yet, but we will consider it if an opportunity arises,” said the younger Lee at the press conference after the listing event on Monday.

Hong Leong Investment Bank has set a fair value of RM1.98 for 99 Speed Mart; Inter-Pacific Research values it at RM1.75, citing its market leadership and aggressive expansion plan. The valuations imply a price-earnings (PE) ratio of 30 times, based on the retailer’s projected earnings for the financial year ending Dec 31, 2025.

The mini-mart chain operator posted a profit after tax of RM133.2 million on revenue of RM2.4 billion for the first three months of 2024.

Hong Leong Investment Bank analyst Syifaa Mahsuri Ismail said 99 Speed Mart commanded a lion’s share of 40.1 per cent by sales in the mini market industry in 2023. It also leads with the largest number of outlets.

She said in a note on Monday: “The large number of outlets enables the company to generate other operating income from, for example, product display fees, target incentives and advertising and promotional fees.”

Syifaa expects 99 Speed Mart’s revenue to grow at a compound annual growth rate (CAGR) of 13.1 per cent between 2023 and 2026, with net profit CAGR of 15.8 per cent, driven by its expansion plans and stable same-store sales growth of 2 per cent per annum.

Inter-Pacific Research compared 99 Speed Mart with Mr DIY, a prominent retailer which listed last year, suggesting that a target PE ratio of 30 times is fair, given 99 Speed Mart’s smaller market capitalisation and lower expected return on equity than that of its peers.