KUALA LUMPUR (Feb 17): 99 Speed Mart Retail Holdings Bhd (KL:99SMART), which made its debut on Bursa Malaysia five months ago, has fallen 20% from the peak of RM2.63 reached on Dec 6.

Selling pressure emerged after it hit the RM2.60-level, which a few stockbroking houses, namely CIMB Securities, AmInvestment Bank and UOB Kay Hian, have pegged their target prices.

At its height of RM2.63, investors who have subscribed to the shares from its initial public offer (IPO) would have a gain of 59% against the debut price of RM1.65.

At Monday’s closing, the stock fell seven sen or 3.27% to RM2.07 with a trading volume of 16.68 million, giving it a market capitalisation of RM17.39 billion.

At the current price, the mini market operator is trading at a forward price-to-earnings (P/E) ratio of 34.43 times, compared with its IPO valuation of 34.7 times based on historical earnings per share of 4.76 sen for FY2023 at RM1.65 per share.

99 Speed Mart is expected to announce its fourth quarter earnings this month.

The market consensus expects the mini market operator to post an annual net profit of RM527 million, or 6.27 sen per share, on a revenue of RM10.14 billion for the financial year ended Dec 31, 2024 (FY2024).

For the nine-month period ended Sept 30, 2024 (9MFY2024), 99 Speed Mart's net profit was up 24.6% to RM366 million, or 4.36 sen per share, from RM294 million, or 3.5 sen per share. Cumulative revenue grew 8.7% to RM7.39 billion from RM6.8 billion a year ago. 

Tradeview Research analyst Tan Jia Hui is upbeat about the company's outlook. 

"Any weakness in share price is a buying opportunity for long-term investors. Our target price is RM2.35 based on a forward PER of 35 times based on FY2025 forecasts, given its robust earnings growth and potential future expansion," said Tan.

She attributes the fall in share price to weak market sentiment and profit taking ahead of earnings disclosure.

Tan, who has a "hold" recommendation on the stock, anticipates the mini market chain to achieve substantial revenue growth underpinned by the opening of new stores and expansion in its bulk sales online platform. She believes that the company's earnings are shielded from impacts of minimum wage hikes and the weakening ringgit.

Tan forecasts the company’s upcoming quarter to be better than its 3QFY2024 results, driven by higher product display fees as store count increases.

The stock is dubbed as one of the successful Main Market listings last year which saw its admission into the KLCI component in less than four months from its maiden trading day on Sept 9.

There is an implied upside of 32.4% at current price against the average target price of RM2.74 by seven analysts covering the stock as shown by Bloomberg.

So far, there were five "buys" and two "holds" recommendations.

To recap, 99 Speed Mart has raised RM1.3 billion from cornerstone investors — the largest amount raised from such investors since 2012. There were 14 cornerstone investors for the IPO included AHAM Asset Management Bhd, Areca Capital Sdn Bhd, AIA, Great Eastern Life Assurance, the Employees Provident Fund and the Social Security Organisation (Perkeso). Notably, there is no moratorium imposed on the cornerstone investors.

However, there is a six-month moratorium imposed on the founder Lee Thiam Wah and his wife, Ng Lee Tieng who collectively owns an 83% stake. The lock-up period will end soon on March 9.