PETALING JAYA: 99 Speed Mart Retail Holdings Bhd needs only a 0.2% average selling price (ASP) adjustment to fully pass through costs, according to UOB Kay Hian (UOBKH) Research.
The company’s management indicated that it will continue to pass on any costs, including revisions to the minimum wage, to protect its margins.
99 Speed Mart’s operations are relatively independent of foreign labour at both its stores and distribution centres, with approximately 4% of its 23,000-strong workforce consisting of foreign workers.
UOBKH Research noted that it has already factored in a RM1,700 minimum wage assumption for 2025.
The brokerage said all things being constant, a RM100 increase in the employees’ base salary would result in a 3.7% impact on 99 Speed Mart’s 2025 earnings, based on its estimates.
Its scenario analysis indicates that only a minimal ASP adjustment would be needed to fully pass through the cost of any minimum wage revision.
According to UOBKH Research, 99 Speed Mart is also on the cusp of a FBM KLCI Index inclusion, prompting the research house to revise its target price (TP) to RM2.60 a share as it maintained its “buy” call.
Hong Leong Investment Bank (HLIB) Research also maintained its “buy’’ call on the company with a higher TP of RM2.98 per share from RM1.98 per share.
This is based on a higher price-to-earnings ratio multiple of 45 times, up from 30 times, pegged to financial year 2025 earnings per share.
HLIB Research is encouraged by the group’s performance as it continues to grow its top and bottom lines.
The group remains focused on the expansion of its store network, which saw a net addition of 51 outlets in the third quarter of 2024 (3Q24).
Additionally, 99 Speed Mart’s bulk sales eCommerce platform, launched in December 2023 in the Klang Valley, has received encouraging response and saw continued sales growth.
Since then, the platform’s coverage has expanded to the southern region in July 2024 and to the northern region this month.
The research house is bullish on 99 Speed Mart, citing its strong market presence, extensive store network and competitive pricing as key drivers of stable and recurring revenue.
99 Speed Mart posted a core profit of RM126.1mil in 3Q24, bringing its nine-month core profit for 2024 to RM384.8mil.
