Kenanga Investment Bank has initiated coverage on 99 Speed Mart Retail Holdings Bhd (99SMART) with a “Market Perform” recommendation and a target price of RM3.80, citing the retailer’s dominant position in Malaysia’s neighbourhood grocery segment and strong long-term growth prospects.
In a research report, the investment bank said the country’s largest listed mass-market grocery retailer is well positioned to benefit from the growing shift towards convenience-led shopping, supported by its extensive network of more than 3,000 outlets nationwide.
Unlike traditional hypermarkets that rely on planned shopping trips, Kenanga said 99 Speed Mart’s neighbourhood-based format allows consumers to make frequent top-up purchases close to home, giving the retailer a significant competitive advantage.
The research house noted that the group plans to open around 250 new stores annually, enabling it to deepen its presence in underserved states while strengthening its leadership in Malaysia’s fastest-growing grocery retail segment.
Kenanga also believes 99 Speed Mart’s competitive pricing strategy will continue to resonate with consumers facing rising living costs.
It said the retailer’s scale enables direct procurement from suppliers, allowing it to offer competitive prices while maintaining healthy margins. More than 90% of the group’s sales are derived from essential daily necessities, making it a defensive consumer stock with resilient demand across economic cycles.
The report also highlighted the company’s growing importance to fast-moving consumer goods (FMCG) manufacturers, describing 99 Speed Mart as an increasingly critical distribution platform for suppliers seeking nationwide market access.
Its network of over 3,000 stores and 22 distribution centres allows suppliers to launch products and execute promotions efficiently across the country.
Beyond retail sales, Kenanga noted that supplier-related income—including product display, advertising, promotional and distribution centre fees—has become an increasingly valuable earnings contributor. These activities account for approximately 8% of group revenue while requiring minimal additional operating costs.
Despite its positive long-term outlook, Kenanga maintained a “Market Perform” rating, saying much of the company’s growth potential is already reflected in its current valuation.
The target price is based on 40 times forecast FY2027 earnings, representing a premium to domestic and regional grocery retail peers, which trade at an average forward price-to-earnings ratio of around 20 times.
Kenanga said the premium valuation is justified by 99 Speed Mart’s projected earnings compound annual growth rate of about 20% between 2022 and 2027, its dominant market position, defensive business model, and scarcity value as Malaysia’s only listed pure-play mass-market grocery retailer.
The research house added that the company’s inclusion in the FBM KLCI has also enhanced its appeal among institutional investors.
However, it cautioned that risks to its outlook include intensifying competition in the grocery retail sector, rising operating costs—particularly labour expenses—and potential supply chain disruptions.
