99 Speed Mart made a strong debut on the Malaysian stock market!

The stock opened at 1.85 ringgit, with an initial trading volume of 53.8 million shares, and then steadily rose, reaching a high of 1.92 ringgit. As of lunchtime, the stock was reported at 1.91 ringgit, with a premium of 15.76%, and a market cap of 16.04 billion ringgit.

This well-known chain supermarket was listed at 1.65 ringgit and raised 2.36 billion ringgit for its listing, making it the largest listing activity on the Malaysian stock market in the past 7 years.

According to the prospectus, 99 Speed Mart issued a total of 0.4 billion new shares, raising 0.6 billion 60 million ringgit, of which 58.9% is used to expand new stores, 15.2% is used to build new distribution centers, 8.3% is used to purchase trucks, and 7.2% is used to upgrade existing stores.

Furthermore, 6.8% is used to repay bank loans, and the remaining 3.6% is used as listing expenses.

Among them, 0.3 billion 89 million ringgit in funds planned for expanding new stores will be used within 36 months, with a target of adding 750 new stores by 2027, with 600 new stores focused on the peninsula and 150 new stores in East Malaysia.

Currently, this chain supermarket has more than 2,600 stores in our country.

Li Lianghua, Executive Director and CEO of 99 Speed Mart, said at a press conference after the bell-ringing ceremony today that as a mini-supermarket, they are proud to have grown to this point and listed on Bursa Malaysia.

At the same time, he pointed out that although they have successfully listed, it also means that they have to accept a higher sense of responsibility and maintain a higher level of transparency between the company and the public, and will continue to ensure the continuous growth and development of the company in the future.

And Li Yanzhong, the company's acting director and director of optimization and sustainable development, pointed out that the company will move forward according to the goals set out in the prospectus, planning to add about 250 new stores each year and maintain a similar expansion rate.

Currently, the company has more than 2,600 stores and aims to open 3,000 stores by the end of 2025.

He mentioned that in the east coast of Peninsula Malaysia, the northern region, and East Malaysia, there are still many areas with low market penetration, so they plan to expand their business in these regions and reach untapped consumer cohorts.

He said, 'We did mention some key regions, such as the east coast, but there are still many growth opportunities in the central and southern regions of West Malaysia and other cities.'

Therefore, he stated that the company currently does not have plans to expand overseas.

'Of course, we maintain an opportunistic attitude and will not miss any opportunities within the Southeast Asia region.'

At the current stage, 99 Speed Mart will maintain its current operation mode, focusing on the existing expansion plans and the Bulksale e-commerce platform.

When asked about plans to expand the business in the future, such as opening 24-hour convenience stores or high-end supermarkets, Li Yanzhong stated that their positioning as a mini supermarket focuses more on the sale of daily necessities and they have no plans to transform into convenience stores or open high-end supermarkets.

In addition, 99 Speed Mart, which has always touted the slogan of being cheap and close, currently has no plans to open high-end supermarkets.

In view of the company's expansion of new stores and wholesale e-commerce platforms, in order to support these sales, they plan to use the funds raised from the IPO to build at least 8 distribution centers. Currently, they plan to build distribution centers in Kedah, Sabah, and Pahang, and have already made some early preparations such as land acquisition.

“Our main focus is still on physical stores, and at the same time, we will not ignore the development of e-commerce platforms.”

Regarding the wholesale e-commerce platform, he shared that they started trial operations in September last year, mainly in the central region, and have accelerated the expansion in the southern region. Currently, they are observing positive trends.

“Because it shares the logistics system with our existing stores. Our current task is to ensure that this infrastructure is perfected before making further decisions.”

He added that in addition to continuing to focus on the development of e-commerce platforms, they will also consider expanding their procurement capabilities.

He pointed out that the company does not have plans for own-brand products, and will continue to focus on cooperation with suppliers to ensure the stability of the supply chain and the compliance of their products in terms of quantity and quality to meet market demand.

Due to 99 Speed Mart's dominant position in the local mini-market sector and its continued growth resilience, it has gained favor from brokerages.

Among them, RHB Research gives a target price of MYR 1.98, while TA Securities gives a fair value of MYR 1.71.

RHB Research analysts expect that considering the company's annual opening of 250 stores and a steady 2% year-on-year same-store sales growth (SSSG), its compound annual growth rates (CAGR) for revenue and net profit from 2023 to 2026 will be 12.4% and 15.2% respectively.

Meanwhile, with strong cash flow and net cash position, the company has committed to a dividend payout ratio of 50%.

Although its price-to-earnings ratio valuation is about 40% higher than its peers, we believe this is reasonable due to its market leadership and active store expansion strategy.

TA Securities has a similar view, believing that with the company's continued revenue growth, operational efficiency, strong financial performance, and strategic expansion in the growing convenience store market, it supports a higher valuation.

TA Securities analysts point out that the company's competitive advantages lie in being the leading local mini-supermarket, a nationwide distribution center network supporting efficient distribution, and competitive pricing.

According to Global Equity Research analyst Aaron George, the expansion of the company's business scale has created barriers for other local mini supermarkets to enter the market and expand their businesses, hindering their ability to compete effectively.