(Left to right): Ganesh Sabaratnam, managing director and chief executive officer (CEO), RHB Investment Bank Bhd; Tan Sri Ong Leong Huat, non-independent non-executive director, RHB Bank Bhd and chairman of RHB Investment Bank Bhd; Heng Kok Wee, chief financial officer, MST Golf Group Bhd; Ng Yap, executive director and group CEO, MST Golf Group Bhd; Low Kok Poh, executive chairman, MST Golf Group Bhd; Benny Ng, executive director, MST Golf Group Bhd; Alice Lee Chia Yee, independent non-executive director, MST Golf Group Bhd; and Poh Ying Loo, independent non-executive director, MST Golf Group Bhd, at MST Golf Group Bhd’s Main Market listing ceremony on Bursa Malaysia on Thursday, July 20, 2023.
KUALA LUMPUR (July 20): MST Golf Group Bhd’s share price opened at 70.5 sen on Thursday (July 20) on its debut on the Main Market of Bursa Malaysia, lower by 12.96% over its initial public offering (IPO) price of 81 sen.
At 11.10am, the counter traded higher at 78 sen, after hovering between 69 sen and 79 sen. It continued to trade actively. From an opening volume of 3.46 million, MST Golf saw trading volume increase to 53.45 million and became the second most active stock in the local bourse.
In a press conference following the listing ceremony, MST Golf executive director and group chief executive officer Ng Yap, in response to the poor opening price, said he understood the current weak market sentiment.
“The whole reason for this IPO is to raise enough funds to speed up expansion. To us, we are just focusing on our fundamentals. We have put ourselves in a position to grow our company to the next phase. Obviously, we hope for better (share price performance) but it is fine,” he said.
At 78 sen, MST Golf has a market capitalisation of RM640.28 million.
Based on an enlarged share capital of 820.87 million shares, MST Golf had expected to have a market capitalisation of RM664.9 million upon listing. This values the company at 27 times of its price-earnings ratio (PER) — based on its earnings per share of three sen in the financial year ended Dec 31, 2022 (FY2022).
The Edge previously reported that the majority of brokerage firms are positive on the IPO and suggest that investors subscribe for the shares, as they (the brokerage firms) believe MST will command a premium when the stock starts trading on July 20.
However, the valuation is above the Bursa Malaysia Consumer Index’s PER of 20.02 times, according to Bloomberg. MST’s closest listed retail competitors, such as InNature Bhd, Padini Holdings Bhd and AEON Co (M) Bhd, are trading at lower PERs of 18.97 times, 10.62 times and 14.58 times respectively. Mr DIY Group (M) Bhd has the highest PER at 31.02 times.
TA Securities Research has valued MST Golf at RM1.20 a share. It said MST Golf saw a return on equity (ROE) of 40% in FY2022 versus Mr DIY's ROE of 36.6%. Apex Securities set a target price of 97 sen, which is a PER of 21.9 times of the firm’s FY2024 earnings per share (EPS) estimate of 4.4 sen for MST.
The golf equipment retail chain operator had planned to raise RM129.6 million from the public issuance of new shares, while its proceeds will mainly be used for local and regional expansion.
Founded in 1989, MST Golf has a total of 44 retail locations in Malaysia and Singapore, and is eyeing to fuel its growth in the retail golf equipment segment in other regional markets, namely Indonesia, Thailand and Vietnam.
Earlier, in an exclusive interview with The Edge, Ng said the group has mapped out internally, to open 19 outlets in Indonesia in the next three years.
He also said that the Malaysian market is still underserved. MST Golf 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 aims to venture into Thailand next year, where it is planning four retail outlets and two others with an indoor golf centre; while Vietnam will follow in 2025, with two retail outlets to start and another two retail outlets with an indoor golf centre later.
When the group launched its prospectus, it said RM62.76 million of its IPO proceeds will be allocated for the expansion in Malaysia and Singapore, while another RM53.55 million for the expansion into new geographical markets.
Meanwhile, RM3 million will be allocated for upgrading of digital technology facilities, RM3.23 million for its working capital, and the remaining RM7.04 million for listing expenses.
Post-listing, MST Golf will adopt a dividend policy of 30% of its earnings to shareholders.
MST Golf 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 rose to RM300.9 million from RM176 million, with a three-year CAGR of 19.6% during the same period.
The group posted a net profit of RM8.79 million for its first quarter ended March 31, 2023 (1QFY2023), on a revenue of RM86.29 million.
The Malaysian Issuing House Sdn Bhd, on behalf of the company, said total demand for the group’s 228 million IPO shares, comprising 160 million public issue shares and 68 million shares offered for sale by existing shareholders, represents a subscription rate of 5.28 times.
RHB Investment Bank Bhd is the principal adviser, sole underwriter, and sole placement agent for the IPO exercise.