KUALA LUMPUR: Mercury Securities Sdn Bhd has assigned a fair value of RM1.99 to Main Market-bound 99 Speed Mart Retail Holdings Bhd, a 21 per cent upside to its initial public offering (IPO) price of RM1.65.
The firm said the fair value of RM1.99 based on 29 times financial year 2025 (FY25) earning per share (EPS).
"We have identified four domestic peers from the consumer sector with large market capitalisation. Applying it to our FY25 EPS of 6.9 sen, we arrive at a fair value of RM1.99," it said in a note.
Mercury Securities said 99 Speed Mart business outlook remains bright due to its leading position as a grocery retailer, aggressive outlet expansion, and self-reinforcing moat of its business model (convenience and competitive pricing).
With over 2,651 outlets throughout Malaysia, the firm said 99Speedmart is the largest player in the mini-market industry (40.1 per cent market share) and the leading grocery retailer (11.6 per cent market share) based on 2023 revenue.
"Despite already having a substantial revenue base, the company still achieved an impressive three year revenue compounded annual growth rate (CAGR) of 10.4 per cent from FY20 to FY23, outpacing its competitors and expanding its market share," it said.
Moving forward, Mercury Securities believes a combination of unique propositions (convenience and competitive pricing) has helped 99Speedmart establish a strong moat for its business model.
The firm said its strategy of offering low prices while achieving high sales volumes enables the company to negotiate better terms and benefits from suppliers.
"These benefits (i.e. product display fees, target incentives, and distribution centres fees) allow 99Speed Mart to maintain its low pricing, achieve better profitability, and fund further outlet expansion.
"Higher number of outlets leads to higher sales, thereby creating a self-reinforcing cycle that further solidifies 99 Speed Mart's position as Malaysia's leading grocery retailer.
"We project financial year 2024 (FY24) to FY26 earnings CAGR of 16.6 per cent for 99 Speed Mart based on several key assumptions," it added.