99 Speed Mart Retail Holdings Bhd, the operator of Malaysiaโs popular convenience store chain, has launched the countryโs largest initial public offering (IPO) in seven years. The IPO, which is set to raise up to RM2.36 billion, marks a significant milestone for Bursa Malaysia, being the largest since Lotte Chemical Titan Holding Bhdโs RM3.77 billion IPO in July 2017.
Key Details of the IPO
Priced at RM1.65 per share, the IPO has already begun accepting orders from both retail and institutional investors. The retail offering is scheduled to close on August 23, while the institutional tranche will end on August 27. The companyโs listing on the Main Market is set for September 9.
If the IPO meets its target, 99 Speed Martโs market capitalization will reach RM13.86 billion, based on an enlarged issued share capital of 8.4 billion shares. This valuation corresponds to a historical price-to-earnings (P/E) ratio of 34.7 times, considering the companyโs net profit of RM400.2 million, or 4.76 sen per share, for the financial year ended December 31, 2023.
Expansion Plans
99 Speed Mart, which currently operates over 2,600 stores across Malaysia, plans to use the IPO proceeds to fuel its ambitious expansion strategy. The company aims to increase its network to 3,000 outlets by the end of 2025. With 59% of the public issue proceeds earmarked for this expansion, the company is poised to solidify its position as a leading player in Malaysiaโs retail sector.
In addition to expanding its store network, 99 Speed Mart will allocate 15% of the IPO proceeds to establish new distribution centers, 8.3% for the purchase of delivery trucks, and 7.2% to upgrade existing outlets. The company also plans to use 6.8%, or RM45 million, of the funds to repay existing bank borrowings, which total RM49.2 million. The remaining funds will be used to cover listing expenses.
Strong Support from Cornerstone Investors
The IPO has garnered strong backing from 14 cornerstone investors, including prominent names such as AHAM Asset Management Bhd, Areca Capital, AIA, Great Eastern Life Assurance, Employees Provident Fund, and the Social Security Organisation. These cornerstone investors have collectively agreed to take up 786 million shares, more than half of the total IPO shares, which will bolster investor confidence in the offering.
Structure of the IPO
The 99 Speed Mart IPO consists of an offer for sale of 1.03 billion existing shares and a public issue of 400 million new shares. The institutional tranche includes 1.22 billion shares through bookbuilding, while 210 million shares have been allocated to retail investors. Each cornerstone investor will hold less than a 5% stake in the company.
The offer for sale, which will raise approximately RM1.7 billion, will benefit the selling shareholders, namely 99 Speed Martโs CEO, Lee Thiam Wah, and his wife, Ng Lee Tieng. The couple will receive the full proceeds from the offer for sale.
Significance of the IPO
This IPO not only marks a significant financial milestone for 99 Speed Mart but also underscores the companyโs strategic growth trajectory in Malaysiaโs competitive retail landscape. With a well-established brand and a robust expansion plan, 99 Speed Mart is well-positioned to capitalize on the growing demand for convenience retailing in Malaysia.
Furthermore, the successful completion of this IPO will set a positive precedent for the Malaysian equity market, potentially encouraging more companies to explore public listings in the near future.
Looking Ahead
As 99 Speed Mart gears up for its listing on Bursa Malaysiaโs Main Market, all eyes will be on how the company leverages the IPO proceeds to enhance its operational capabilities and achieve its expansion goals. With a strong foundation, substantial market presence, and the backing of major institutional investors, 99 Speed Mart is on a promising path to further growth and success.
Conclusion
99 Speed Martโs RM2.36 billion IPO is a landmark event for Malaysiaโs financial markets, offering a glimpse into the companyโs ambitious future. As the largest IPO in seven years, this offering not only highlights the potential of Malaysiaโs retail sector but also reinforces the countryโs attractiveness as a destination for significant investment.
Investors and market watchers will be keenly observing the companyโs performance post-listing, particularly as it embarks on its expansion journey. With strong fundamentals and a clear growth strategy, 99 Speed Mart is set to remain a dominant force in Malaysiaโs convenience store industry.
