[KUALA LUMPUR] Major mini-market chain operator 99 Speed Mart Retail on Thursday (Aug 15) launched Malaysia’s biggest initial public offering (IPO) in seven years.
It expects to raise up to RM2.36 billion (S$701 million) for a place in the main market. The last time the country witnessed an IPO of this size was in 2017, with South Korea’s Lotte Chemical Titan’s bid to raise close to RM3.8 billion.
The IPO comprises up to 1.03 billion existing shares and 400 million new shares, priced at RM1.65 a share.
Trading has been scheduled to start on Sep 9, in a nod to the double-nine in the company’s name.
At the launch of the listing prospectus at a hotel in Shah Alam in Selangor on Thursday, its founder and chief executive Lee Thiam Wah said the listing would pave the way for the company to raise funds that would speed up its expansion, and enable it to operate more transparently and efficiently.
He took pains to describe 99 Speed Mart’s mini-market model, which focuses on offering affordable groceries to consumers – as distinct from convenience stores such as 7-Eleven.
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From mom-and-pop sundry shop to modern mini market
Founded in 1987 as a traditional sundry shop in Selangor, 99 Speed Mart has grown its presence over the years; it now has 2,651 outlets across Malaysia, the majority of them in Klang Valley. Plans have been drawn up to have 3,000 outlets by end-2025.
Last September, the mini-market operator set up an online platform to offer bulk purchases for retail and enterprise customers, and incorporated a trading company in China for product procurement.
Frost & Sullivan Malaysia’s market report on the country’s mini-market industry named 99 Speed Mart as the largest player, having cornered 40 per cent of the market share by revenue in 2023.
The report noted that Malaysia’s grocery retail segment registered a compound annual growth rate of 7.2 per cent between 2019 and 2023.
Lee told The Business Times: “Demand in this segment continues to grow robustly as the population increases. We will maintain our current business model and focus on the Malaysian market for now.” He said there are no plans at the moment to expand overseas or enter the premium segment.
Albert Lee, 99 Speed Mart alternate director and son of the founder, echoed this sentiment. He said that nearly 60 per cent of the RM660 million in proceeds from the issuance of the 400 million new shares will be used to expand the company’s network of outlets across Malaysia.
The mini-market operator will also allocate RM100 million (15 per cent of the proceeds) to set up another six distribution centres in different states, in support of the growing number of outlets.
The younger Lee said: “Our target is for each store to serve 1,500 to 2,000 households; our outlets in Klang Valley now serve between 2,500 and 2,600 consumers each.”
He noted that the outlets chalk up average sales of between RM400,000 and RM600,000 a year.
More outlets in northern and east-coast states
Regarding future expansion, the younger Lee said the company is setting up more outlets in the northern and east-coast states, where its presence is now limited.
The company also plans to spend RM102.6 million, or 15.5 per cent of the proceeds, on new delivery trucks and to upgrade its existing outlets.
Another RM45 million will go towards paring down its borrowings, and the remaining RM23.4 million, to cover listing expenses.
The company has started accepting orders from both retail and institutional investors. The retail offering closes on Aug 23, and that for the institutional tranche, on Aug 27.
CIMB Investment Bank, Affin Hwang Investment Bank and RHB Investment Bank are underwriters in the offering.
Chu Kok Wei, chief executive of group wholesale banking at CIMB, said 99 Speed Mart is set to be the largest IPO by market capitalisation and IPO deal size. Participants include 14 cornerstone investors, including Malaysian government-linked investment companies and asset managers, the support from which covers 55 per cent of the IPO deal size.
The deal will boost Malaysia’s IPO market, where listings this year have so far raised over US$450 million. In the first six months of 2024, the country’s IPO capital market raised the highest amount of funds among South-east Asian bourses.
This year’s IPOs have included those of palm-oil producer Johor Plantations Group and Alpha IVF Group. Johor Plantation’s IPO, at US$156 million, was the largest debut in the country since 2022; Alpha’s listing raised US$98 million.
