Malaysia's IPO Boom: 99 Speed Mart Leads Listing Frenzy with Stunning Stock Surge
Shares of 99 Speed Mart Retail Holdings Berhad, Malaysia’s convenience-store giant, have surged 15% since their listing debut, shattering the country’s record for the largest initial public offering in seven years.
The price of a share of the business closed at RM1.89 on Tuesday, September 10, 2024, well above the IPO price of RM1.65 per share. This boosted the company’s market value to approximately RM15.8 billion (US$3.66 billion).
The IPO strengthens Kuala Lumpur’s position as Southeast Asia’s busiest market for listings this year, drawing renewed global investor interest.
“Currently, there is an interest in Malaysian equities that we’ve not seen for years: brokers are seeing more inquiries from foreign funds; our fund is seeing more meeting requests; and brokers are even using the word ‘hot’ to describe the Malaysian market,” wrote James Hay and Bill Betts of the Pangolin Asia Fund based in Singapore.
With Malaysia’s economy projected to grow around 5% in 2024, 99 Speed Mart gives investors significant exposure to the consumer sector.
“This stock is poised for success as it taps into domestic consumption trends,” said Nixon Wong, chief investment officer at Tradeview Capital, a boutique fund manager based in Kuala Lumpur.
Brokerages, including Hong Leong Investment Bank, have started coverage with buy ratings. “It’s a straightforward, easy-to-understand business model,” noted Syifaa’ Mahsuri Ismail, an analyst.
“The Malaysian market has lacked strong consumer companies with consistent performance,” said Philip Wong, an analyst at UOB Kay Hian. 99 Speed Mart’s dominance in the market, coupled with its bargaining power over suppliers, puts the company in a strong position, he added.
The IPO also turned founder Lee Thiam Wah and his wife Ng Lee Tieng into billionaires. Their combined shares are now worth about RM15.1 billion (US$3.48 billion).
Lee, the son of a construction worker and a hawker, contracted polio as a child, which left him unable to use his legs and made finding work hard. His family faced financial difficulties, so he decided to start his own business, selling snacks from a small stall to make a living.
At 23, Lee started his business in 1987 with a small sundry shop in Selangor. Over time, he expanded it into a retail giant with RM8.97 billion (US$2.07 billion) in revenue, RM422 million (US$97.2 million) in earnings, 20,700 employees, and over 2,600 stores. The company now holds 40% of Malaysia’s mini-mart market and nearly 12% of the total grocery industry.
What’s even more impressive is that the company grew so much with very little debt. It has more cash than debt, and its debt makes up only 9.3% of its total equity.
How much will the business be worth in three years and what is the expected return to investors?
Analysts expect 99 Speed Mart’s revenue to increase by 10.6% annually over the next three years, reaching RM12.1 billion (US$2.79 billion) by 2027. They also predict the company’s earnings will grow by 13.3% per year, hitting RM613 million (US$141 million) within the same period.
If earnings hit RM613 million (US$141 million) by 2027 and the price-to-earnings ratio stays at 37.7 times earnings, the company will be worth RM23.1 billion (US$5.32 billion), or RM2.75 per share.
If a share of the business will be worth RM2.75 by 2027, investors can expect an annual return of 13.3% from Tuesday’s price of RM1.89 over the next three years.
Insight
99 Speed Mart’s recent IPO success marks a significant milestone for Malaysia’s stock market, reflecting the growing investor interest in the region. With a surge of 15% since its debut, the company’s market value now stands at RM15.8 billion (US$3.66 billion), fueled by its dominance in the convenience-store sector and strong domestic consumption trends. Its low debt, substantial market share, and forecasted revenue growth of 10.6% annually over the next three years provide investors with confidence in sustained profitability. Analysts predict an annual return of 13.3% for shareholders, positioning the company for continued success amidst Malaysia’s projected economic growth.
SeA (Southeast Asia) Focus Portfolio Update:
From its inception on December 22, 2023, to August 30, 2024, the portfolio, which invests in the highest-quality and fastest-growing businesses in Southeast Asia at attractive prices, delivered a total return of 36.4%, outperforming all Southeast Asian country index funds.
Follow the portfolio here.