MST Golf Group Bhd (MST, 5316), Malaysia's leading golf equipment retailer and service provider, will be making its debut on the Bursa Main Market today. Apart from being a sport, golfing is also a trend and lifestyle, and MST is riding on the growth of the golfing industry hence registered a revenue CAGR of 41.8% for FY19-FY22. In fact, we forecast MST to achieve a net profit CAGR of 19.0% from FY22 to FY25. BUY with a target price of RM0.99 by ascribing a 20x PER over FY24 EPS of 4.9 sen, which is the average PE of its listed peers on Bursa Malaysia.

Established in 1989, MST has attained a market share of 51% with more than 90,000 active members under its loyalty membership program named ilovegolf. These active members are recurring customers and have contributed 75.7% to its FY2022 revenue. MST carries 97 brands, including notable ones such as Taylor Made and Majesty, with exclusive distributorship in Malaysia, Singapore, and Indonesia. It has 12,000 stock keeping units in 36 retail outlets in Malaysia and 8 retail outlets in Singapore. In 2022, MST opened its first 3-in-3 retail concept named MST Golf Arena, which delivers a unique golf retail experience combining shopping, playing, learning, fitting, practicing, and dining. This was followed by the opening of the second MST Golf Arena in Tropicana Gardens.

MST intends to utilize RM62.8m of the IPO proceeds to upgrade and refurbish existing golf retail outlets and open 13 new outlets in Malaysia and 2 new outlets in Singapore by 2025, of which 5 will be equipped with indoor golf centers. It also plans to penetrate Indonesia, Thailand, and Vietnam, with a target of opening 16 retail outlets and retail outlets with indoor golf centers by 2026.

Coupled with its expansion pipeline and riding on the increasing golfing trend, MST's business is expected to be resilient. Therefore, we expect a revenue CAGR of 13.3% from FY22 to FY25. We also noticed that net margins has had improved from 5.8% in FY19 to 9.7% in FY22, due to increased sales from both retail and wholesale segments amid better operational efficiency resulting from cost management and digital deployment. Gearing ratio is expected to improve from 1.14x as of April 30, 2023, to 0.53x post-IPO, which is a testament to MST's business management.

MST is targeting a minimum dividend payout of 30% from its PAT. Based on this, we are forecasting the company to pay dividends of 1.3 sen and 1.5 sen per share for FY23 and FY24, respectively, translating into a yield of 1.6% and 1.8%.

Source: Rakuten Research - 20 Jul 2023

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