To date, 99 Speed Mart’s IPO has attracted 14 cornerstone investors.
PETALING JAYA: Mini-market chain retailer 99 Speed Mart Retail Holdings Bhd has launched its initial public offering (IPO) which will raise RM2.36bil, the country’s largest IPO in seven years.
Priced at RM1.65 per share, 99 Speed Mart’s IPO exercise entails a public issuance of 400 million new shares as well as an offer for sale of 1.03 billion existing shares, with 1.22 billion shares allocated to institutional investors and the remaining 210 million shares for retail investors.
Founded in 1987 by founder and current chief executive officer Lee Thiam Wah, the retail chain was initially a traditional sundry shop named Pasar Hiap Hoe. It has now grown into the largest mini-market player and leading grocery retailer with about 2,651 outlets nationwide.
The mini-market retailer, which is scheduled to list on the Main Market on Sept 9, is expected to reach a market capitalisation of RM13.86bil post-listing, potentially beating this year’s highest market capitalisation of RM2.1bil by Johor Plantations Group Bhd if successful.
To date, 99 Speed Mart’s IPO has attracted 14 cornerstone investors, which include fund managers AHAM Asset Management Bhd and Areca Capital, insurers AIA and Great Eastern Life Assurance, as well as state investment companies the Employees Provident Fund (EPF) and the Social Security Organisation (Socso).
As a part of the group’s institutional offering, 99 Speed Mart had entered into a master cornerstone placement agreement with the selling shareholders Lee and his wife, Ng Lee Tieng, the sole bookrunner CIMB Investment Bank Bhd and the cornerstone investors on July 26, 2024.
The cornerstone investors have agreed to take up 786 million shares out of the institutional offerings, equivalent to more than half of the IPO shares. The cornerstone investors will only be holding less than a 5% stake in the company according to the agreement.
Separately, with the offer for sale of 1.03 billion existing shares being made available, 99 Speed Mart owners Lee and his wife will be taking home about RM1.7bil in cash from selling a portion of their shares.
Once listed, Lee and Ng will remain as the controlling shareholders with a total stake of 80.4% in the mini-market retail chain. With the assumption that the over-allotment option is fully exercised, Lee LYG Holdings, a company fully-owned by Lee, will hold a 51.5% stake in 99 Speed Mart, Lee 25.7% and Ng, 3.2%.
Meanwhile, the public issuance is expected to raise RM660mil with the bulk of the proceeds allocated towards expanding the retail chain’s operations.
Speaking at the group’s prospectus launch in Shah Alam yesterday, alternate director Albert Lee Yan Zhong said 58.9% of the proceeds equivalent to RM389mil will go towards expanding its network of outlets, while 15.2% or RM100mil will be allocated for setting up new distribution centres (DCs).
“Our target is to open on average 250 outlets annually with an immediate target to have a total of about 3,000 outlets operating nationwide by end-2025.
“And in order to support our planned expansion, we would need to establish at least eight new DCs and operate 25 DCs in total by the end of 2027,” he explained.
Lee noted that the group usually focuses on economies of scale, preferring to have outlets located less than 100km apart from any DCs.
99 Speed Mart has less than 10 outlets in four states, namely, Perlis, Terengganu, Sarawak and Kelantan.
“For us, it’s not the question of whether or not we are going to Kelantan, but instead we will head to Terengganu first since we recently opened a DC in Gambang, Pahang. Then only will we move to Kelantan,” he said.
On the topic of oversaturation of outlets, Lee pointed out that “we don’t see it (number of outlets) oversaturating. Even in central regions, there is room to grow because since Selangor contributes to about seven million (people) of the total population, we still have a chance to open more outlets there.
“So our approach will be to strategically place the outlets in areas where demand justifies it,” he added.
Meanwhile, the group will be looking to purchase new delivery trucks and upgrade its existing outlets, of which 99 Speed Mart will be allocating RM55mil and RM47.6mil respectively from its IPO proceeds towards this.
The remaining proceeds will be spent on repayment of bank borrowings at RM45mil as well as listing expenses at RM23.4mil.
Additionally, Lee shared that the group also plans to expand into international markets and enhance its newly-launched bulk sales online platform, 99 Bulksales.
“We plan to further strengthen our sourcing capabilities by tapping into new potential markets within the Asia-Pacific region. By having an international supply chain, it allows us to be well-positioned to potentially reduce cost and also access opportunities to establish an international outlet presence,” he said.
The group also believes that demand from the group’s online platform will continue to grow.
99 Bulksales is estimated to contribute about RM1mil in revenue monthly, Lee said, adding that “hence, we are optimistic on the prospects of 99 Bulksales as we work on improving its geographical reach”.
For the financial period ended March 31, 2024, 99 Speed Mart posted a gross profit of RM239.24mil on a revenue of RM2.42bil.
