This article first appeared in The Edge Malaysia Weekly on May 22, 2023 - May 28, 2023

MINI-market operator KK Supermart & Superstore Sdn Bhd, which generates about RM1 billion in annual revenue, is weighing the option of floating its shares on Bursa Malaysia, possibly within the next one to three years.

Ahead of the potential listing, the retailer is on an expansion drive to increase its store network nationwide to more than 800 outlets by year end. It will also consolidate and synergise its food and beverage business with its mini-market segment, and open convenience stores.

KK Super Mart is the second-largest mini-market chain in the country after 99 Speed Mart Sdn Bhd, which operates the 99Speedmart chain. Its rival, which has 2,348 stores, is expected to maintain pole position as it aims to cross the 2,500-store mark by end-2023.

KK Supermart founder and executive chairman Datuk Seri Dr Chai Kee Kan, popularly known as K K Chai, tells The Edge that a potential listing is on the horizon “within the next one to three years, when the time is right”.

KK Supermart operates the group’s flagship business KK Super Mart, and Chai is quick to dismiss talk of a potential sale of the business.

”We are not selling. In fact, we are looking to strengthen our business. We are expanding nationwide. We plan to grow further and cater to consumers at large. We plan to grow (the business) and add another 120 to 150 stores this year,” he says, adding that the store count currently stands at 700, which includes the 50-plus new openings in the first five months of the year.

In March, Ion Analytics (a financial technology platform that provides market intelligence, data and analysis on global merger and acquisition deals), quoting sources, reported that KK Supermart was exploring strategic options including the potential sale of its grocery store business. But the sources said that talks on a sale mandate were preliminary and that there was no formal process yet.

Industry observers say that the retailer has been expanding rapidly in recent times.

Based on previous reports, KK Supermart operated 526 stores in May 2021. By last October, the number had grown to 636 stores and it has since increased to 700 outlets.

Apart from Malaysia, the home-grown player has 21 stores in Nepal and three in Kolkata, India.

“We are also upgrading (the older stores) to provide a more comfortable consumer experience. We will continue to operate 24 hours,” adds Chai, who owns 95% of KK Supermart. The remaining 5% is held by Datin Seri Loh Siew Mui.

A search on the Companies Commission of Malaysia website shows that in the financial year ended June 30, 2022, the company posted RM919.65 million in revenue, down 10.6% from RM1.03 billion in FY2021. However, net profit swelled to RM67.86 million, 84.2% more than RM36.84 million in the previous year.

Its total liabilities as at the date amounted to RM341.53 million, of which RM192.13 were current. Total assets stood at RM552.29 million, and accumulated profit at RM194.57 million.

Asked about the declining margins experienced by most grocers after the pandemic, Chai does not seem too concerned as he attributes the drop to higher operating costs, including labour costs, rather than weaker demand.

KK Supermart continues to experience same-store sales growth in 2023 versus 2022, he says.

“The outlook for the business is good due to the strategically located outlets, which are convenient for consumers, and the group being a responsive retailer, catering to market sentiment and the requirements of consumers,” Chai notes.

According to Retail Group Malaysia’s latest Retail Industry Report dated March 2023, the mini-market, convenience store and cooperative segment grew by 17% last year. Operators within the retail segment have forecast business to strengthen in the January-March 2023 period, growing by 15.8%, which is double the expansion in the previous corresponding period.

KK Supermart is part of the KK Group of companies, whose diversified business includes cafés and kopitiams, hospitality, personal care, automobiles, manufacturing and real estate.

Chai says the group is looking at consolidating some businesses such as cafés and kopitiams to support the growth of the KK Supermart chain.

According to its website, the group operates B Café International (which offers coffee, tea, bread, cakes and hot food) and KK Kopitiam (a 24-hour business offering a variety of stalls that serve local beverages and food). Individual kopitiams occupy not less than 3,000 sq ft and offer items such as Hainan coffee.

KK Group recently opened the KK Concept Store, which focuses on ready-to-eat meals and fresh food. As a group, it is also looking at expanding its manufacturing business in the personal care segment including hair care and body care products.

The retailer is next expected to venture into the convenience-store segment following its franchise partnership with South Korea’s GS Retail, which operates the GS25 chain. Last year, it was reported that KK Group had entered a master franchise deal to open GS25 stores in Malaysia. A total of 500 stores have been planned over the next five years. Chai says,however, that the opening date of the first GS25 store has yet to be decided.

Competition in the space will be intense. South Korea’s largest convenience store operator BGF Retail (which operates the CU stores) and its fourth-largest convenience-store operator emart24 already have a presence in Malaysia.

Mini markets are distinguished from convenience stores by the number of SKUs (stock keeping units) they offer. The former typically has a wider range of products.  

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