(From left) 99 Speed Mart Retail Holdings Bhd alternate director Leong Sau Chan, independent non-executive director Serina Abdul Samad, senior independent non-executive director Ho Tat Heng, chairman Datuk Chua Tia Guan, CEO Lee Thiam Wah, non-independent director Ng Lee Tieng, ED Lee Lay Liang, independent non-executive director Nirmalah V Thurai, independent non-executive directors Ting Seng Hock & Datuk Abdul Latif Abu Seman, and Albert Lee Yan Zhong, alternate director to Thiam Wah. (Pic by Patrick Goh)

KUALA LUMPUR (Sept 9): Shares of 99 Speed Mart Retail Holdings Bhd (KL:99SMART) closed up 23 sen or 13.94% on its market debut at RM1.88, valuing the mini market group at RM15.79 billion, based on its issued capital of 8.4 billion shares.

At Monday’s closing, 99 Speed Mart had the 32nd largest market capitalisation across Bursa Malaysia and was 14.6% higher than KLCI component Genting Malaysia Bhd (KL:GENM), which had a market valuation of RM13.77 billion.

The counter opened at RM1.85 — a 12.1% or 20 sen premium to its initial public offering (IPO) price of RM1.65 — on its debut on the Main Market of Bursa Malaysia on Monday.

At one point, the counter rose as much as 27 sen or 16.36% to RM1.92, which valued the group at RM16.13 billion.

It was the second biggest gainer on Bursa Malaysia, and the most active counter with 421.96 million shares traded.

The IPO of 99 Speed Mart, Malaysia's largest in seven years, raised a total of RM2.36 billion, including RM1.7 billion from an offer for sale of 1.028 billion shares by founder and chief executive officer Lee Thiam Wah and his wife Ng Lee Tieng.

The public issue of 400 million new shares raised up to RM660 million. The group has set aside 59% of that amount to expand its network of outlets, 15% to set up new distribution centres, 8.3% to buy delivery trucks, and 7.2% to upgrade existing outlets.

The IPO was oversubscribed by 3.04 times.

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.

Analysts assign fair value of RM1.75 to RM1.98

Hong Leong Investment Bank (HLIB) has assigned a fair value of RM1.98, followed by Inter-Pacific Research with a fair value of RM1.75, to 99 Speed Mart on the back of its market leader position, coupled with aggressive store expansion.

The fair values imply a 30 times price-earnings ratio of the retailer's earnings for the financial year ending Dec 31, 2025 (FY2025).

HLIB in a note on Monday expects 99 Speed Mart to record an FY2023 to FY2026 revenue compound annual growth rate (CAGR) of 13.1%, and a net profit CAGR of 15.8%.

"This projected growth will be driven by: i) the opening of 250 retail outlets annually; and ii) stable same-store sales growth of 2% per annum," it added.

The research house noted that 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%, said HLIB.

Meanwhile, Inter-Pacific in a note last Friday said Mr DIY Group (M) Bhd (KL:MRDIY) is its closest peer that is engaged in retail business operations and convenience stores respectively, as there is no other listed company specifically operating in the mini-market segment.

"Our valuation is benchmarked to Mr DIY, and we deem the target PER of 30 times to be fair, after taking into consideration its slightly smaller market capitalisation and lower targeted return on equity among its peers," the research house added.