Despite posting a robust set of results for its second quarter (Q2), 99 Speed Mart Retail Holdings Bhd has been slapped with a downgrade by CGS International over its stretched valuations.
The research house also stated it prefers Mr DIY Group (M) Bhd for exposure in the consumer discretionary space, where the two retail chain giants operate.
99 Speed Mart’s core net profit for the quarter ended June 30 (Q2 FY2025) jumped 22.1% to RM153.2 million from RM125.5 million a year ago.
Its first half (H1 FY2025) earnings rose 14.6% to RM296.4 million from RM258.7 million the previous year.
Q2 revenue rose 11.9% to RM2.71 billion from RM2.42 billion in the previous corresponding quarter, while first half revenue increased 9.8% to RM5.32 billion.
The increased revenue was driven mainly by outlet expansion and higher transaction volumes.
The group also gained from stronger consumer purchasing power following the minimum wage increase in February, and various government social assistance initiatives.
CGS said the results were in line at 51% of both its and Bloomberg’s consensus full-year forecasts.
However, it downgraded its call on 99 Speed Mart to “reduce” following its “recent share price gains” and stretched valuations of 32.1 times CY2026F (forecast) price-to-earnings (PE) multiple versus peers’ 21 times. It left its target price (TP) unchanged at RM2.30.
“Even with stronger return on equity (ROE) generation, 99 Speed Mart’s multiples seem stretched at current levels,” it said in a note today.
“In the consumer discretionary space, for a similar growth profile, we prefer Mr DIY over 99 Speed Mart,” it said, noting the former trades at a cheaper 23 times PE multiple and offers higher dividends of 3% to 5%.
Strong bargaining power
Meanwhile, AmInvestment Bank (AmInvest) has maintained its “buy” call on the stock with a higher TP of RM2.90.
“We continue to favour 99 Speed Mart for their dominant market share in the mini-market segment and strong bargaining power,” it said in a note today.
AmInvest also said the group is poised to be the “prime beneficiary” of the cost-of-living relief measures announced by Prime Minister Anwar Ibrahim recently, which will provide at least RM2.8 billion in direct disposable income support.
“This should underpin short-term consumption, particularly among lower- and middle-income groups, reinforcing 99 Speed Mart’s advantage as a value-focused retailer,” it added.
At the close of trading, 99 Speed Mart fell 5 sen or 2% to RM2.45, valuing the group at RM20.58 billion.
Its price has been at this level year-to-date but is up nearly 49% from its IPO price of RM1.65. Founded by its wheelchair-bound CEO Lee Thiam Wah, 99 Speed Mart was listed last September.
Mr DIY’s shares closed unchanged at RM1.55 and is down 17% year-to-date and 3% lower from its IPO price of RM1.60.
The company was listed in October 2020 in Malaysia’s largest IPO of the year. It was co-founded by brothers Tan Yu Yeh and Tan Yu Wei, who opened their first hardware store in 2005.
