99 Speedmart: Malaysia's 'king of mini-markets'

Many of you are likely familiar with 99 Speedmart, the popular and convenient mini-mart chain. But have you ever thought of becoming their shareholder? In September 2024, 99 Speedmart officially went public, allowing the public to invest in "Malaysia's king of mini-markets."

Over the past four years, the company has distributed RM1.31 billion in dividends to shareholders!

Let’s dive into this new stock by examining its business model, industry position, and financials.

Chain of mini-marts

99 Speedmart operates in the retail sector, focusing on everyday goods with stable demand. As a well-known local chain in Malaysia, 99 Speedmart stores are ubiquitous in residential areas, promoting the tagline "Near 'n Save". Store sizes typically range from 2,500 to 5,000 square feet.

According to 99 Speedmart's data, 73% of their revenue comes from food and beverages, 12% from baby and personal care products, 8% from household items, and the remaining 7% from other categories.

99 Speedmart dominates the mini-mart sector with the highest number of outlets. Founded in 2000 by Lee Thiam Wah, the brand focuses on serving local communities. With 2,542 outlets across Malaysia, it significantly outpaces competitors and plans to open 250 new outlets each year. In 2022, it held a 37.9% market share in the mini-market sector and 75.4% among chain brands.

99 Speedmart's robust logistics system supports its vast sales network, serving 940,000 customers daily with each outlet averaging over RM10,000 in sales. The company operates 19 distribution centers and 568 trucks, ensuring consistent supply to its 2,542 outlets nationwide.

The IPO funds will mainly be used to open new stores, build distribution centers, and buy trucks.

Fast-paced growth favors small stores

Malaysia's grocery retail industry has rebounded from the pandemic, growing from RM69.3 billion in 2018 to RM72.7 billion in 2022, with a CAGR of 1.2% and a 19.2% surge in 2022 alone.

In particular, mini-markets outperformed, expanding from RM16.4 billion to RM21.3 billion at a 6.8% annual growth rate.

The fast pace of modern life makes small retail stores more popular. Frost & Sullivan predicts that from 2022 to 2027, chain mini-markets and convenience stores will grow over 10%, outpacing larger formats.

Financial performance: thriving through the pandemic

From 2020 to 2022, the company's revenue and net profit (profit after tax) both grew, with an accelerated rebound in 2023.

Revenue increased steadily from RM 6.841 billion in 2020 to RM 8.075 billion in 2022, an 8.6% CAGR, and surged by 15.2% in the first nine months of 2023. This continuous growth is driven by opening new outlets and increasing sales per outlet.

Even amid the pandemic, the company's gross margin remained steady above 9%, demonstrating its business stability.

Investment value

Retail companies that attract the market typically have a stable customer base, efficient operations, solid financials, continuous expansion, and reasonable valuations. Here are the key highlights of 99 SM that fit these criteria:

1. Highlights

2. Market comparables

Currently, 99 SM can be compared to several domestic companies in the stock market, including large supermarket brand AEON and chain hardware store MR DIY. Here's how the 99 SM stacks up against them.

99 SM not only has a larger business scale than AEON and MR DIY, but it also outperforms them in terms of profitability and growth potential. As a result, after going public, it has achieved a higher market valuation (PE of 39x).

In the current market environment, this valuation is relatively reasonable compared to its peers, but it still falls on the higher end of the spectrum for the daily retail sector. Investors should closely monitor whether 99 SM's store expansion and profitability align with expectations.

Want to access additional information and data? Click $99SMART (5326.BMS)$ to check more details!

If you're new to the IPO subscription process, here's a quick guide on how to do it on moomoo >> How to Subscribe Malaysia IPO on moomoo