KUALA LUMPUR (June 28): Main market-bound golf equipment retail chain operator MST Golf Group Bhd is setting its initial public offering (IPO) price at 81 sen per share and will have a market capitalisation of RM664.90 million upon listing with an enlarged share capital of 820.87 million shares.

This values the company at about 27 times its price-earnings ratio — based on its net profit of RM26.65 million for the Dec 31, 2022 (FY2022) period.

Set to be listed on July 20, the group's IPO comprises a public issuance of 160 million new shares and an offer for sale of up to 68 million existing shares.

At 81 sen a share, it is expected to raise RM184.68 million, of which RM129.6 million will be from the issuance of new shares.

Under the public issue portion, 41.5 million shares will be made available for application by the Malaysian public, followed by 7.9 million for eligible directors, employees and persons who have contributed to the success of the group.

Another 76 million new shares will be available for private placement to selected investors. The remaining 34.6 million shares are for application by way of placement to identified Bumiputera investors approved by the Ministry of Investment, Trade and Industry (Miti).

At the IPO prospectus launch here on Wednesday (June 28), the group said close to 90% of the IPO proceeds raised from the public issuance (RM129.60 million) will go towards funding its expansion in Malaysia and Singapore and into new geographical markets, followed by 2.3% for upgrading of digital technology facilities, 2.5% as working capital, and the remaining 5.4% for the listing expenses.

MST Golf operates 36 retail outlets in Malaysia and eight in Singapore. It recorded a profit after tax of RM29.1 million in FY2022, compared with RM10.2 million for FY2019, representing a three-year compound annual growth rate (CAGR) of 41.8%. Revenue grew to RM300.9 million from RM176 million, with a three-year CAGR of 19.6% during the same period.

According to the group, it currently commands 51% of the Malaysian market in terms of imported golf equipment.

It wants to open 10 new outlets — five with an indoor golf centre — in Malaysia and Singapore in the next three years, and upgrade 10 existing outlets. The group also aims to expand into Indonesia, Thailand and Vietnam.

MST Golf chief executive officer Ng Yap told reporters after the group’s prospectus launch that the major driver behind the group’s expansion is the fact that golf consumers in Southeast Asia are generally under-served.

The group's outward expansion will start with Indonesia, where it wants to set up three retail outlets; it plans three more retail outlets there with indoor golf centres.

The group wants to venture into Thailand next year, where it is planning four retail outlets and two others with an indoor golf centre; Vietnam will follow in 2025, with two retail outlets to start and another two retail outlets with an indoor golf centre later.

From the balance of the proceeds, the group will use RM3 million to upgrade its digital technology facilities, RM2.51 million for working capital and RM5.43 million for listing expenses.

Post listing, MST Golf will adopt a dividend policy of 30% of its earnings to shareholders.

Subscription to the public issue portion of the IPO is available from Wednesday until July 7.

RHB Investment Bank Bhd is the principal adviser, sole underwriter, and sole placement agent for the IPO exercise.