IPO Note

MERCURY SECURITIES SDN BHD

Tuesday, August 20, 2024
(A Participating Organisation of Bursa
Toh Woo Kim
Malaysia Securities Bhd.)
wookim@mersec.com.my

99 Speed Mart Retail Main Market

Consumer Products & Services Sector
SUBSCRIBE
Self-reinforcing Moat IPO Price: RM1.65
Fair Value: RM1.99

Valuation / Recommendation
Business Overview
We have a SUBSCRIBE recommendation on 99 Speed Mart Retail
Holdings Bhd (99Speedmart) with an FV of RM1.99 based on 29x FY25F 99 Speed Mart Retail Holdings Bhd operates the well-known
EPS, translating to a 21% upside to the IPO price. Our target PE is pegged “99 Speed Mart” chain of mini-market outlets involved in
retailing daily necessities.
to the average valuation of large-cap consumer stocks listed on Bursa
Malaysia. We like the stock for its leading position as a grocery retailer,
aggressive outlet expansion, and self-reinforcing moat of its business
model (convenience and competitive pricing).
Listing Details

Investment Highlights Listing date 9 September 2024

Leading grocery retailer. With over 2,651 outlets throughout Malaysia, Shariah compliant No
99Speedmart is the largest player in the mini-market industry (40.1% New shares (m) 400.0
market share) and the leading grocery retailer (11.6% market share) Offer for sale (m) 1,028.0
based on 2023 revenue. Despite already having a substantial revenue Funds raised (RM m) 660.0
base, the company still achieved an impressive 3-year revenue CAGR of
10.4% from FY20-23, outpacing its competitors and expanding its market
Post Listing
share. This growth was largely driven by 1) Aggressive store expansion
into new regions; and 2) A positive trend in SSSG, reflecting a shift in Ordinary shares (m) 8,400
consumers' preference towards small-format stores for convenience. Market cap (RM m) 13,860
Free float (%) 17.0
Aggressive outlet expansion. Across FY19-23, 99Speedmart opened
P/E (FY24F) 26.5
about 247 new outlets annually on average, focusing on under-penetrated
areas such as the Northern and East Coast regions of Peninsular
Malaysia, as well as East Malaysia. Management alluded that it could Top 3 Shareholders
expand up to 5,000 outlets nationwide, indicating ample room for growth Lee LYG Holdings 51.5%
before hitting saturation. 99Speedmart is still maintaining the same
Lee Thiam Wah 25.7%
aggressive pace of store expansion in FY25F-FY27F, targeting to open
250 new outlets annually. The company will also build new distribution Ng Lee Tieng 3.2%
centres (DC) with a target of 25 by 2027 (from 19 DCs currently) to support
its outlet expansion. Utilisation of Proceeds RM m

Expansion of network of outlets 389

Self-reinforcing moat. We believe a combination of unique propositions
(convenience and competitive pricing) has helped 99Speedmart establish Establishment of new DCs 100
a strong moat for its business model. Its strategy of offering low prices Purchase of delivery trucks 55
while achieving high sales volumes enables the company to negotiate
better terms and benefits from suppliers. These benefits (i.e. product Upgrading of existing outlets 47.6
display fees, target incentives, and DC fees) allow 99Speedmart to Repayment of existing bank borrowings 45
maintain its low pricing, achieve better profitability, and fund further outlet
Listing expenses 23.4
expansion. Higher number of outlets leads to higher sales, thereby
creating a self-reinforcing cycle that further solidifies 99Speedmart's
position as Malaysia's leading grocery retailer.
6.8% 3.5%
Risk factors for 99Speedmart include (1) Supply chain disruptions, (2)
Dependency on the ability to maintain competitive pricing, and (3) Risk of 7.2%
delay in operations due to IT infrastructure disruption.
FY Dec FY22 FY23 FY24F FY25F FY26F 8.3%
Revenue (RM m) 8,075.3 9,210.5 10,063.7 10,799.0 11,954.5
EBITDA (RM m) 732.0 804.4 961.1 1,045.0 1,134.0 58.9%
PAT (RM m) 326.7 400.2 522.7 576.1 634.2
PAT Margin (%) 4.0 4.3 5.2 5.3 5.3 15.2%
EPS (sen) 4.1 5.0 6.2 6.9 7.6
EPS Growth (%) (22.1) 22.5 24.4 10.2 10.1
BV Per Share (sen) 4.8 6.0 7.1 8.1 8.2
PE (x) 40.4 33.0 26.5 24.1 21.9
Net Gearing (%) Cash Cash Cash Cash Cash Source: Company, Mercury Securities
ROE (%) 51.7 73.9 35.7 32.9 30.7
 MERCURY SECURITIES SDN BHD IPO Note
(A Participating Organisation of Bursa
Malaysia Securities Bhd.)

Financial Highlights and Valuation

Mini-market industry leader. With over 2,651 outlets throughout Malaysia, 99Speedmart is the largest
player in the mini-market industry (40.1% market share) and the leading grocery retailer (11.6% market
share) in terms of 2023 revenue, according to market research by Frost & Sullivan (refer to Figures 1
and 2). Despite already having a substantial revenue base (approximately double that of the next
largest grocery retailer), the company still achieved an impressive 3-year revenue CAGR of 10.4% from
FY20-23, outpacing its competitors and expanding its market share. This growth was largely driven by
1) Aggressive store expansion into new regions; and 2) A positive trend in same-store sales growth
(SSSG), reflecting a shift in consumers' preference towards small-format stores for convenience.

Figure 1: 99Speedmart’s market share in the mini-market Figure 2: 99Speedmart’s market share in the grocery-based
industry, % retail industry, %
45% 16%

40.1%
14% 12.9%
40% 37.9%
37.5%
11.6%
34.8% 12% 11.1%
35% 10.0%
10%
29.0%
30%
8% 7.0%
26.0%
6.2%
25% 6%

20% 4%
2018 2019 2020 2021 2022 2023 2018 2019 2020 2021 2022 2023

Source: Frost & Sullivan, IPO Prospectus Source: Frost & Sullivan, IPO Prospectus

Aggressive outlet expansion, with ample room for growth. Across FY19-23, 99Speedmart opened
approximately 247 outlets annually on average, amounting to a 4-year CAGR of 12.8%. The focus of
99Speedmart’s expansion has been on under-penetrated areas such as the Northern and East Coast
regions of Peninsular Malaysia, and East Malaysia (see Figure 4). In regions with already high outlet
penetration rates (currently at about 2,300 household coverage per outlet), new stores are still being
added, albeit at a slower pace, when opportunities arise such as in new township developments.

Management estimates it can push the population coverage to 1,500 households per outlet before
store cannibalisation becomes a concern. With Malaysia's population size of nearly 34m, this suggests
that 99Speedmart mini-mart could expand to more than 5,000 outlets nationwide, indicating ample
room for growth before hitting saturation. As such, it is not surprising to see that 99Speedmart is still
maintaining the same aggressive pace of store expansion in FY25F-FY27F (see Figure 3), targeting to
open 250 new outlets annually, with plans to launch 600 new outlets in Peninsular Malaysia and 150
new outlets in East Malaysia by the end of 2027.

Figure 3: Total number of 99Speedmart outlets Figure 4: Regional breakdown of 99Speedmart outlets
3,500
3,276 Central Southern Northern East Malaysia East Coast
1,200
3,026
991 997 1,011
3,000 943
2,776 1,000 903
2,526
2,500 800
659 681 688
2,251
593 566 586
2,024 600 549
510
2,000 453
1,799 382
400
230 237 247
1,500 174 193
200 106 119
69 97
55
1,000 0
FY20 FY21 FY22 FY23 FY24F FY25F FY26F 2021 2022 2023 FPE 31 March As of July 2024
2024
Source: Company, Mercury Securities Source: Company, Mercury Securities
 MERCURY SECURITIES SDN BHD IPO Note
(A Participating Organisation of Bursa
Malaysia Securities Bhd.)

Short payback period. Given the relatively low capex requirement of RM300k to open a new outlet,
the payback period for 99Speedmart’s new outlets is typically less than three years on average.
According to management, it usually takes just three to five years for new outlets to mature and achieve
sales levels comparable to other existing outlets in the vicinity.

Figure 5: Regional breakdown of 99Speedmart outlet network, as of July 2024

Population
Region Number of Households Area Household Density Outlets Count
Coverage
(‘000) (km2) (household per km2) (as of July 2024) (household per outlet)
Peninsular Malaysia
- Central 2,359 8,233 286.5 1,011 2,333
- East Coast 1,022 64,124 15.9 119 8,587
- Northern 1,738 32,504 53.5 586 2,966
- Southern 1,571 27,631 56.8 688 2,283
East Malaysia 1,220 198,363 6.1 247 4,938
Source: Company, Mercury Securities

New DCs crucial to support expansion. In tandem with its outlet expansion, 99Speedmart will also
build new DCs to meet the increasing logistic needs and better serve its outlets. The company's current
plan includes building a new DC in Sarawak by the end of 2024 and another one in Selangor by 2025.
With the funds raised from its IPO, 99Speedmart aims to establish at least six new DCs within the next
three years. Currently, only Kedah, Sabah, and Pahang have been identified as the locations for three
new DCs. By the end of 2027, 99Speedmart expects to operate at least 25 DCs.

Positive SSSG trend reflecting preference shift towards small-format stores. From the pre-
pandemic period of FY19 to FY23, 99Speedmart has achieved a gross SSSG of 21.8%, representing
a 4-year CAGR of 5.1% (calculated based on 1,272 outlets). We believe this positive trend reflects a
persistent shift in consumer preference towards small-format stores in Malaysia, whose distributed
network of stores offers enough convenient options for shopping close to home. This is evident in the
increase in 99Speedmart’s average number of sales transactions per outlet per day to 475 in 2023,
reflecting an 8% rise from the post-COVID normalised rate of 440 transactions in 2022.

On a year-on-year basis, 99Speedmart had saw a significant increase in SSSG growth of 21.3% and
3.7% in 2020 and 2021 respectively, largely attributed to the COVID-19 lockdown, demonstrating the
advantage of its outlets’ proximity to residential communities. Despite experiencing a normalisation
with negative SSSG of -4.9% in 2022 due to the easing of lockdown measures, there was a strong
rebound back to 6.2% in 2023, driven by the robust economic recovery and was partially aided by
pricing adjustments to account for inflation.

Figure 6: Average daily transactions and value per

transaction (in RM) Figure 7: 99Speedmart’s SSSG, %
24.54 23.59
560 25 25%
22.29 22.00 21.80 22.00 21.3%
21.33
20%
20
520
523 15%
15
10%
480 6.2%
485
480
475 475 10 5% 3.7%
1.5% 1.5% 1.5%
459
440 0%
440 5

-5%
400 0 -4.9%
FY20 FY21 FY22 FY23 FY24F FY25F FY26F -10%
Average number of sales transactions per outlet per day FY20 FY21 FY22 FY23 FY24F FY25F FY26F
Average Transaction value (RHS)

Source: Company, Mercury Securities Source: Company, Mercury Securities

 MERCURY SECURITIES SDN BHD IPO Note
(A Participating Organisation of Bursa
Malaysia Securities Bhd.)

A self-reinforcing moat with its competitive pricing strategy. 99Speedmart's key business strategy
is to sell its products at competitive prices to drive higher consumer demand and increase sales. By
selling products in high volume, the company is able to negotiate with brand owners and wholesale
suppliers for lower purchase costs. Even though its prices are lower than those of its competitors,
99Speedmart can still achieve better profit margins due to its low fixed operating costs, strict cost control,
and economies of scale.

Given its extensive network of outlets, 99Speedmart is also able to take advantage of its bargaining
power with suppliers to earn additional income through product display fees, target incentives, and DC
fees (for handling distribution for certain suppliers). In fact, these additional income sources are quite
significant, making up 8.3%-9.3% of revenue in FY20-23, on top of the 9.1%-9.6% gross margins that
99Speedmart already earns. See Figure 8.

We believe that this combination of unique propositions has helped 99Speedmart establish a strong moat
for its business model. Its strategy of offering low prices while achieving high sales volumes enables the
company to negotiate better terms and benefits from suppliers. These benefits allow 99Speedmart to
maintain its low pricing, achieve better profitability, and fund further outlet expansion. Higher number of
outlets leads to higher sales, thereby creating a self-reinforcing cycle that solidifies 99Speedmart's
entrenched position as Malaysia's leading grocery retailer.

Figure 8: Gross profit and other operating income (in RM m)

900 841
800 756 741
700 635
600
508
500 442
413
400 337
300
163 185
200 130 154 145
110 122
91
100
0
FY20 FY21 FY22 FY23

Gross Profit Product display fees Incentives DC fees

Source: Company, Mercury Securities

We project FY24F-26F earnings CAGR of 16.6% for 99Speedmart based on several key assumptions,
which are 1) Stable SSSG of 1.5% p.a.; 2) Stable gross margins of 9.5%, with other operating income
also at a similar level; and 3) 250 new outlets expansion annually. The company is committed to a 50%
dividend payout policy, which is backed by strong free cashflow generation and a healthy balance sheet
with net cash position.

Figure 9: Revenue trend Figure 10: PAT trend

800 PAT (RM m) PAT margin (%) 6%
Revenue (RM bn) YoY Growth
12.0 16%
12
10.8 14% 634 5%
10.1 576
600
10 9.2 12% 523
4%
7.8 8.1
8 10% 419 400
400 3%
8% 327
6
6% 2%
4
4% 200

2 1%
2%

0 0% 0 0%
FY21 FY22 FY23 FY24F FY25F FY26F FY21 FY22 FY23 FY24F FY25F FY26F

Source: Company, Mercury Securities Source: Company, Mercury Securities

 MERCURY SECURITIES SDN BHD IPO Note
(A Participating Organisation of Bursa
Malaysia Securities Bhd.)

RM1.99 FV based on 29x FY25F EPS. We have identified four domestic peers from the consumer sector
with large market capitalisation. We peg a target PE valuation of 29x for 99Speedmart, which is in line
with the average forward PE valuation of its peers. Applying it to our FY25F EPS of 6.9 sen, we arrive at
a fair value of RM1.99.

Non-shariah compliant. The stock is non-shariah compliant mainly because approximately 11.3% of its
sales are from non-halal products such as alcohol and tobacco (more than the 10% cap). Management
does not have an active plan to address this, but is likely to rely on organic growth of other products to
bring the contribution of non-halal products to below the 10% cap.

Peer Comparison (as of 19 August 2024)

Company Bloomberg Share Mkt Cap

Ticker price (RM) (RM m) EPS Growth (%) P/E (x) P/B ROE (%) Net Yield (%)
2024 2025 2024 2025 2024 2025 2024 2025 2024
F&N FNH MK 29.52 10,827 17.0 1.6 17.9 17.6 2.9 2.7 15.9 15.3 2.8
Mr DIY MRDIY MK 2.10 19,853 14.5 13.2 30.9 27.3 9.8 8.4 34.3 34.0 1.9
Nestle NESZ MK 105.10 24,646 (4.7) 12.1 39.2 35.0 39.4 37.2 92.9 102.9 2.6
QL Resources QLG MK 6.70 16,302 8.2 5.7 36.3 34.4 5.1 4.6 14.9 13.7 1.0
Simple Average 8.7 8.2 31.1 28.5 14.3 13.2 39.5 41.5 2.1
99 Speed Mart 99SMART MK 1.65 13,860 13.5 7.2 26.5 24.1 7.1 8.1 35.8 32.9 1.9

Source: Bloomberg, Mercury Securities

Sensitivity Analysis (Fair Value)

FV (RM) Gross Profit Margin
1.99 9.1% 9.3% 9.5% 9.7% 9.9%
-0.5% 1.83 1.89 1.94 2.00 2.05
0.5% 1.86 1.92 1.97 2.03 2.08
SSSG

1.5% 1.89 1.95 1.99 2.06 2.12

2.0% 1.90 1.96 2.02 2.08 2.13
2.5% 1.92 1.98 2.03 2.09 2.15
 MERCURY SECURITIES SDN BHD IPO Note
(A Participating Organisation of Bursa
Malaysia Securities Bhd.)

Company Background

A major FMCG retailer. 99 Speed Mart Retail Holdings Bhd operates the well-known “99 Speedmart”
chain of mini-market stores with 2,651 outlets nationwide as of July 2024. Its merchandising strategy
is to offer customers a wide range of daily necessities, mainly FMCG products like food and beverages,
personal and baby care products, and household products.

99Speedmart has around 650 suppliers, with its top major suppliers being prominent FMCG producers
or distributors in Malaysia such as Nestle, Dutch Lady, DKSH, L H Uni, and Great Plus. In September
2023, the company launched its online platform for bulk sales called "99 Bulksales". The company also
recently incorporated subsidiaries in China to explore procuring new merchandise for sale in their
outlets.

Figure 11: 99Speedmart Group Structure

Source: Company

Competitively-priced FMCG products. The tagline "Near n' Save" originates from 99Speedmart's
business model, which prioritises convenience and easy access for customers through a wide network
of outlets located near residential communities. Each outlet stocks daily necessities, primarily FMCG
products that are competitively priced. The company is also proactive in adjusting its pricing to ensure
its product prices are among the lowest in the market.

Expanding into bulk sales business. In September 2023, 99Speedmart launched their bulk sales
online platform called "99 Bulksales" on their website. This e-commerce business model is currently
only available in Malaysia's Central and Southern regions. It allows both consumers and enterprise
customers to purchase goods in larger quantities (RM500 minimum order). Customers will need to pick
up orders from selected outlets for orders less than half a cubic meter, while orders exceeding half a
cubic meter will be delivered for free. 99Speedmart's fleet of trucks will handle the delivery of these
bulk orders to optimise efficiency.

Strategic outlet’s location selection. 99Speedmart has a team dedicated to handling new outlet
openings efficiently. The entire process, from site identification to outlet opening, usually takes only 1
to 2 months. 99Speedmart outlets are typically located in prime locations with easy customer access
and high visibility. Factors such as population, customer traffic, competition, street visibility, and
accessibility are carefully considered in selecting these locations. This thorough process helps the
outlets reach more consumers easily, leading to improved sales performance.
 MERCURY SECURITIES SDN BHD IPO Note
(A Participating Organisation of Bursa
Malaysia Securities Bhd.)

Figure 12: Geographical distribution of outlets and DCs

Source: Company

Extensive logistic operation. 99Speedmart owns and operates its 19 DCs and 618 delivery trucks.
This has helped the company control logistics operations better and achieve greater efficiency. Each
DC will have store coverage of around 100km radius. Approximately 80% of 99Speedmart’s purchases
are first delivered to the DCs, where they will be stored as inventories for redistribution to the outlets
based on their requirements.

Having an efficient logistic operation with its own DCs and delivery trucks has allowed 99Speedmart to
earn additional income in the form of DC fees from certain suppliers by handling their goods at its DCs.
Combined with the high sales volume generated by the extensive network of its outlets, this has also
enabled the company to negotiate favourable trading terms with its main suppliers, contributing to the
increase in other operating income over the years.

Figure 13: Process flow of 99Speedmart’s centralised retail management and control system

Source: Company
 MERCURY SECURITIES SDN BHD IPO Note
(A Participating Organisation of Bursa
Malaysia Securities Bhd.)

Figure 14: Key Management Team

Name and Designation Age Profile
Lee Thiam Wah 59 • Over 36 years of experience and expertise in the retail industry
Founder • In charge of the overall expansion of 99Speedmart as well as the corporate strategy
Executive Director planning and strategies on new product development to meet customers’ expectations.
CEO • Executive MBA programme from SPACE, in collaboration with Southern University College

Yong Eng Kwang 38 • Over 17 years of experience in the retail industry

COO • In charge of overseeing the entire operations of the outlets of 99Speedmart and continues
to oversee the industrial relations and government affairs of 99Speedmart
• Master of Management (Distinction) from the Open University Malaysia

Ong Yee Peng 33 • Over 11 years of experience in auditing and accounting.

CFO • In charge of the financial management of the Company and Group, overseeing the statutory
reporting and internal management reporting functions of 99Speedmart, ensuring
appropriate financial planning and financial corporate compliance, treasury, tax and other
finance operations.
• Bachelor of Business in International Business (Accounting) from Edith Cowan University,
Australia

Leong Sau Chan 46 • Over 23 years of experience in the retail industry

Director of Business • In charge of leading the Business Development team in identifying business and potential
Development growth opportunities as well as analysing, identifying and implementing outlet expansion
strategies.
• Bachelor of Arts in International Business Administration from the University of Northumbria
at Newcastle, England
Foo Meng Kee 43 • Joined 99EM as General Manager of East Malaysia Operations in March 2023
General Manager of East • Over 18 years of experience in the FMCG retail industry.
Malaysia Operations • In charge of overseeing 99Speedmart’s operations and government affairs in East Malaysia.
• Bachelor of Food Science and Technology from the Universiti Putra Malaysia
• Master of Business Administration from Universiti Utara Malaysia

Yong Kin Onn 66 • Appointed Director of Management Information System in 2013

Director of Management • Over 37 years of experience in the IT industry
Information System • In charge of designing, developing, implementing and deploying 99Speedmart’s in-house
warehouse management system and POS system at the outlets as well as developing the
procedures for, amongst others, the security, disaster recovery and contingency plan for the
systems.
• Bachelor of Science from the University of Guelph, Canada

Chia Yong Cherng 44 • Appointed as Director of Logistics in 2021

Director of Logistics • Over 15 years of experience in the retail industry
• In charge of overseeing 99Speedmart’s supply chain, which includes the expansion and
daily operations of DCs as well as the logistics of the distribution of products from the DCs
to outlets.
• Bachelor of Arts in International Business Administration from the University of Northumbria
at Newcastle, England

Source: Company

Inspirational and ambitious founder. Mr. Lee Thiam Wah’s inspiring rags-to-riches story is well-
documented. Despite his physical disability due to poliomyelitis and only six years of primary education,
he emerged as a successful entrepreneur.

The history of 99Speedmart’s business dates back to 1987 when Mr. Lee Thiam Wah established a
traditional sundry shop in Klang. In 1992, he began setting up a mini-market chain under the sole
proprietorship of Ninety-Nine Market, operating under the name "Pasar Mini 99". In 2000, Lee Thiam
Wah incorporated 99Speedmart which operated its own outlets as well as franchise-operated outlets.
However, all franchise-operated outlets were phased out by 2010 due to a change in expansion
strategy. Over the past two decades, under Lee Thiam Wah's leadership, 99Speedmart has rapidly
expanded to reach 2,651 outlets across Malaysia as of July 2024.
 MERCURY SECURITIES SDN BHD IPO Note
(A Participating Organisation of Bursa
Malaysia Securities Bhd.)

Future Plans & Business Strategies

Expanding footprint across Malaysia. The company aims to open 250 new outlets annually, with
plans to launch 600 new outlets in Peninsular Malaysia and 150 new outlets in East Malaysia by the
end of 2027. The focus will be on areas with lower outlet penetration rates (such as Northern, East
Coast of Peninsular Malaysia, and East Malaysia). Having said that, 99Speedmart will also expand in
regions with high outlet penetration rates when opportunities exist, such as in new township
developments.

Adding new DCs and replacing older delivery trucks. 99Speedmart already planned to open two
new DCs using its own funds – one in Sarawak by the end of 2024 and one in Selangor by 2025. These
locations are expected to be more strategic and closer to some of its outlets in order to accommodate
the growing number of outlets. With an allocation of RM100m from its IPO proceeds, the company aims
to build at least six additional DCs within the next three years. So far, only Kedah, Sabah, and Pahang
have been identified as locations for three new DCs. The new DC in Sabah is proposed to replace the
Sipitang DC, which is currently rented. By the end of 2027, 99Speedmart expects to operate at least
25 DCs.

For delivery trucks, the company plans to improve its fleet by prioritising the phase-out and replacement
of trucks over 15 years old. RM55m will be allocated from IPO proceeds to fund the purchase of new
delivery trucks from 2025 to 2027. This will help to improve 99Speedmart’s last-mile logistic capabilities
and reduce operating costs in the long run.

Opportunities in international market. 99Speedmart plans to enhance its sourcing capabilities by

exploring new markets in the Asia Pacific region, especially those offering a wide range of competitively
priced products. The company has recently started procuring certain household products from China,
which it believes can provide better value to its customers. Having an international supply chain makes
99Speedmart well-positioned to reduce costs potentially and further enables the company to assess
opportunities to establish an international outlet presence.

Exploring bulk sales with e-commerce. 99Speedmart targets to gradually roll out its bulk sales
operations throughout the regions or states in which it operates. The company believes this will appeal
to a broader customer base, including retailers and enterprise customers looking to purchase supplies
and materials in bulk.

Key Risks
Supply chain disruption. Despite long-standing relationships with some key suppliers, there is no
assurance of the continued commitment from the supplier to 99Speedmart. If the company needs to
seek alternative suppliers, it may involve substantial time, cost and resources. Negotiating
commercially acceptable terms and conditions with new suppliers may also be challenging.

Continued success depends on ability to maintain competitive pricing. There is no assurance of

the benefits received or product purchasing prices from suppliers, as it depends on 99Speedmart's
ability to remain competitive. If these benefits are not secured, 99Speedmart may need to increase
selling prices and/or accept lower margins, which could impact its business and financial performance

Brand and reputation risks. Customer complaints about failure to meet consumer expectations
regarding the products and services provided by 99Speedmart could harm its reputation if not handled
properly. This could further impact the customer base and negatively affect business performance and
future expansion plans.

Non-renewal of licenses and business permits. As of July 2024, 99Speedmart has 456 outlets and
2 DCs operating without the necessary fire safety certification. Additionally, 124 outlets are operating
without a business license and 20 outlets are operating without a rice license. Moreover, there are 10
residential properties and 28 shop lots being used as employee hostels that have not obtained the
Certificate of Accommodation. The company is confident that these issues will not significantly impact
 MERCURY SECURITIES SDN BHD IPO Note
(A Participating Organisation of Bursa
Malaysia Securities Bhd.)

its business operations since the costs of rectification and potential penalties are not considered
material. The non-compliant outlets are spread across various locations in Malaysia and fall under the
jurisdiction of different local authorities.

IT infrastructure disruptions causing operational delays. 99Speedmart relies on IT systems for

managing inventory, sales tracking, payment processing, accounting, human resources, and payroll.
Any disruptions to these systems could result in data loss and affect its daily operations. This may lead
to inventory problems and loss of customer confidence.

IPO Details

Offer for Sale (m) Public Issue (m) Total (m) (%)

Retail Offering

Eligible Persons - 42.0 42.0 0.5

Malaysian Public (Bumiputera) - 84.0 84.0 1.0

Malaysian Public (Non-Bumiputera) - 84.0 84.0 1.0

Institutional Offering

Selected investors 1,028.0 190 1,218.0 14.5

Total 1,028.0 400.0 1,428.0 17.0

Source: Company
 MERCURY SECURITIES SDN BHD IPO Note
(A Participating Organisation of Bursa
Malaysia Securities Bhd.)

Disclaimer & Disclosure of Conflict of Interest

The information contained in this report is based on data obtained from data and sources believed to be reliable at the time of issue of this report. However,
the data and/or sources have not been independently verified and as such, no representation, express or implied, are made as to the accuracy, adequacy,
completeness or reliability of the information or opinions in this report.

This report may contain forward-looking statements which are often but not always identified by the use of words such as “believe”, “estimate”, “intend” and
“expect” and statements that an event or result “may”, “will” or “might” occur or be achieved and other similar expressions. Such forward-looking statements
are based on assumptions made and information currently available to Mercury Securities Sdn Bhd. (“Mercury Securities”) and are subject to known and
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Accordingly, neither Mercury Securities nor any of its holding company, related companies, directors, employees, agents and/or associates nor person
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This report does not have regard to the specific investment objectives, financial situation and particular needs of any specific person. Accordingly, investors
are advised to make their own independent evaluation of the information contained in this report and seek advice from, amongst others, tax, accounting,
financial planner, legal or other business professionals regarding the appropriateness of investing in any securities or the investment strategies discussed or
recommended in this report. Nothing in this report constitutes investment, legal, accounting or tax advice or a representation that any investment or strategy
is suitable or appropriate to your individual circumstances or otherwise represents a personal recommendation to you. This report is not intended, and should
not under no circumstances be considered as an offer to sell or a solicitation of any offer or a solicitation or expression of views to influence any one to buy or
sell the securities referred to herein or any related financial instruments.

Mercury Securities and its holding company, related companies, directors, employees, agents, associates and/or person connected with it may, from time to
time, hold any positions in the securities and/or capital market products (including but not limited to shares, warrants and/or derivatives), trade or otherwise
effect transactions for its own account or the account of its customers or be materially interested in any securities mentioned herein or any securities related
thereto, and may further act as market maker or have assumed underwriting commitment or deal with such securities and provide advisory, investment, share
margin facility or other services for or do business with any companies or entities mentioned in this report. In reviewing the report, investors should be aware
that any or all of the foregoing among other things, may give rise to real or potential conflict of interests and should exercise their own judgement before
making any investment decisions.

This research report is being supplied to you on a strictly confidential basis solely for your information and is made strictly on the basis that it will remain
confidential. All materials presented in this report, unless specifically indicated otherwise, are under copyright to Mercury Securities. This research report and
its contents may not be reproduced, stored in a retrieval system, redistributed, transmitted, or passed on, directly or indirectly, to any person or published in
whole or in part, or altered in any way, for any purpose.

This report may provide the addresses of, or contain hyperlinks to websites. Mercury Securities takes no responsibility for the content contained therein. Such
addresses or hyperlinks (including addresses or hyperlinks to Mercury Securities own website material) are provided solely for your convenience. The
information and the content of the linked site do not in any way form part of this report. Accessing such website or following such link through the report or
Mercury Securities’ website shall be at your own risk.

This report is not directed to or intended for distribution or publication outside Malaysia. If you are outside Malaysia, you should have regard to the laws of the
jurisdiction in which you are located.

The views expressed in this research report accurately reflect the analyst’s personal views about any and all of the subject securities or issuers; and no part
of the research analyst’s compensation was, is or will be, directly or indirectly, related to the specific recommendations or views expressed in the report.
 MERCURY SECURITIES SDN BHD IPO Note
(A Participating Organisation of Bursa
Malaysia Securities Bhd.)

Recommendation Rating
Mercury Securities maintains a list of stock coverage. Stock can be added or dropped subject to needs with or without notice. Hence, the recommendation
rating only applicable to stocks under the list. Stocks out of the coverage list will not carry recommendation rating as the analyst may not follow the stocks
adequately.

Mercury Securities has the following recommendation rating:

BUY Stock’s total return is expected to be +10% or better over the next 12 months (including dividend yield)

HOLD Stock’s total return is expected to be within +10% or -10% over the next 12 months (including dividend yield)

SELL Stock’s total return is expected to be -10% or worse over the next 12 months (including dividend yield)

Published & Printed By:

MERCURY SECURITIES SDN BHD

Registration No. 198401000672 (113193-W)
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Telephone: (603) - 6203 7227
Website: www.mercurysecurities.com.my
Email: mercurykl@mersec.com.my