(From left) 99 Speed Mart Retail Holdings Bhd non-independent non-executive chairman Datuk Chua Tia Guan, non-independent non-executive director Ng Lee Tieng, executive director and chief executive officer Lee Thiam Wah, CIMB Group CEO of group wholesale banking Chu Kok Wei, CIMB Investment Bank Bhd regional head of investment banking and deputy CEO Nor Masliza Sulaiman, and Denise Wong, the head of corporate coverage, group wholesale banking, at CIMB Bank Bhd on Thursday. (Photo by Shahrill Basri/The Edge)

KUALA LUMPUR (Aug 15): Convenience store chain operator 99 Speed Mart Retail Holdings Bhd launched Malaysia’s biggest initial public offering (IPO) in seven years, which would raise up to RM2.36 billion for its Main Market listing.

The IPO is priced at RM1.65 per share, according to the official prospectus. The company has begun taking orders from both retail and institutional investors. The retail offering will close on Aug 23, while the institutional tranche will end on Aug 27.

Listing is scheduled for Sept 9.

If successful, the IPO would raise the most funds on Bursa Malaysia since July 2017, when Lotte Chemical Titan Holding Bhd (KL:LCTITAN) grossed RM3.77 billion.

Currently, 99 Speed Mart operates more than 2,600 stores in Malaysia selling everything from toilet papers to eggs, and targets to raise the number of outlets to 3,000 stores by the end of 2025.

At RM1.65 per share and based on its enlarged issued share capital of 8.4 billion shares, 99 Speed Mart would have a market capitalisation is RM13.86 billion.

This represents a historical price-to-earnings multiple of 34.7 times, based on its net profit of RM400.2 million or 4.76 sen per share for the financial year ended Dec 31, 2023 (FY2023).

Cornerstone investors

The IPO is backed by 14 of the so-called cornerstone investors, including fund managers AHAM Asset Management Bhd and Areca Capital, insurers AIA and Great Eastern Life Assurance, as well as state investment companies Employees Provident Fund and Social Security Organisation.

Cornerstone investors — typically large institutional investors — commit to taking up a big chunk of IPO shares before they are marketed to other retail and institutional investors. Their presence helps to build up other investors’ confidence for the shares during an IPO.

99 Speed Mart’s IPO involves an offer for sale of 1.03 billion existing shares and a public issue of 400 million new shares. The institutional tranche comprises 1.22 billion shares through bookbuilding, while 210 million shares have been allocated to retail investors.

The cornerstone investors have together agreed to take up 786 million shares, more than half of the IPO shares, and each will hold less than 5% stake in the company.

Funds for expansion, payday for founders

The public issue would raise up to RM660 million, and the company has earmarked nearly 59% of the proceeds for expansion of its network of outlets. The company will also spend 15% on setting up new distribution centres, 8.3% for purchase of delivery trucks, and 7.2% to upgrade existing outlets.

99 Speed Mart will also use 6.8% or RM45 million of the IPO proceeds for repayment of existing bank borrowings totalling RM49.2 million. The rest will go towards defraying listing expenses.

The offer for sale meanwhile would gross about RM1.7 billion, which would accrue entirely to the selling shareholders Lee Thiam Wah, who is also the chief executive officer of 99 Speed Mart, and his wife Ng Lee Tieng.

CIMB Investment Bank is the IPO’s principal adviser, sole bookrunner, sole managing underwriter and joint underwriter. Affin Hwang Investment Bank and RHB Investment Bank are joint underwriters.