UOB Kay Hian Securities (M) Sdn. Bhd.
Date of Report: Thursday, 22 May 2025

Malaysia Market Insights: Eco-Shop IPO Debut, Public Bank’s Resilience & SP Setia’s Growth Path – In-Depth Financial Review

Key Highlights

• Eco-Shop Marketing: IPO initiation with high growth prospects and robust financials
• Public Bank: Solid 1Q25 results, sector-best provision buffers, and attractive valuation
• SP Setia: Land sales and REIT listing to anchor 2025 earnings
• Automobile Sector: TIV dips on festive break; Chinese brands gaining market share
• Technical Picks: Central Global and HCK Capital Group identified for short-term trading

Eco-Shop Marketing: IPO Initiation – Tiny Prices, Towering Potential

Share Price: RM1.13
Target Price: RM1.45 (Upside: 28.0%)
GICS Sector: Consumer Discretionary
Market Cap: RM6.49b (USD 1.51b)
Major Shareholders: Dato’ Sri Lee (75.9%), Creador (1.9%)
Analyst: Philip Wong

Investment Thesis

Eco-Shop enters the Malaysian bourse as the nation’s leading fixed-price retailer, rivaling established giants like 99 Speed Mart (99SM) and MRDIY. Despite operating just 297 stores versus 99SM’s 2,778 and MRDIY’s 1,465, Eco-Shop’s growth runway is immense. The retailer’s unique model strikes a balance between 99SM’s low-margin, high-turnover approach and MRDIY’s high-margin, discretionary play, resulting in a compelling three-year profit CAGR of 17.7% for FY24–27—substantially outpacing its peers.

Business Model & Strategic Positioning

• High Transaction Volume: Eco-Shop averages 988 daily transactions per store, more than double 99SM and triple MRDIY, with a comparable basket size.
• Gross Margin: 26.2%, blending high product turnover with essentials and general merchandise for balanced margin performance.
• Store Economics: Highest EBIT per store (RM984,000 vs MRDIY’s RM623,000 and 99SM’s RM265,000). Capital efficiency lags 99SM due to more substantial store investments, but payback period remains attractive at 1.5–1.8 years.
• Resilient SSSG: Same-store sales growth (SSSG) averaged 6.2% (FY22–24), outstripping peers even under fixed pricing constraints.
• Product Differentiation: SKU overlap of 15–25% with 99SM and 20–30% with MRDIY; in-house repacking capability enhances product variety and affordability.

Growth Outlook & Financial Projections

• Store Expansion: Targeting 70 new stores annually, underpinning a projected revenue CAGR of 21.3% for FY24–27—double that of 99SM and MRDIY.
• Market Dominance: Commands 67.8% share of Malaysia’s RM4.0b dollar store market.
• Financial Sustainability: Cash-based business model supports aggressive yet sustainable growth; gearing stable at 0.05x–0.06x until FY27, when a one-off distribution center build raises gearing to a manageable 0.28x.

Risks

• Foreign labor dependency (14% of workforce). Each RM100 wage hike could impact FY27 EPS by ~6%, but a 0.4% ASP revision could mitigate this.
• Distribution center capex in FY27 will temporarily elevate gearing.

ESG Initiatives

• 2.5% reduction in emission intensity (FY24), with LED lighting and passive design in distribution centers.
• Health and Safety Committee oversees workplace safety for >6,000 staff.
• ESG disclosures assured by PwC, with sustainability reporting in IPO prospectus.

Key Operational Metrics Comparison: Eco-Shop vs. Peers

Public Bank: 1Q25 Results in Line, Strong Provision Buffers

Share Price: RM4.43
Target Price: RM4.90
GICS Sector: Financials
Market Cap: RM85.99b (USD 19.92b)
Major Shareholders: Consolidated Teh Holdings Sdn Bhd (21.6%), EPF (15.3%)
Analyst: Keith Wee Teck Keong

1Q25 Financial Performance

• Net profit: RM1.75b (+5.6% yoy, -3.0% qoq), in line with forecasts (24% of FY target).
• Non-interest income: Up 18.9% yoy, driven by stockbroking, forex, trading, and insurance.
• Loan growth: 5.6% yoy, led by mortgages (+5.2%), auto (+15.3%), non-residential properties (+7.0%).
• Net interest margin (NIM): 2.19% (down from 2.21% in 4Q24) due to deposit cost pressures; 2025 NIM guidance revised to -5bps.
• Cost-to-income ratio: 35.0% (improved yoy); staff costs up 5.3% yoy.
• Pre-provision operating profit: 7.1% yoy growth; sequentially softer on higher opex and lower NIM.
• Provisions: Net charge of 4bps (normalized from a 4Q24 write-back).
• GIL ratio: Stable at 0.53% (domestic portfolio improved to 0.36%).
• Loan-loss coverage: 160%; RM1.2b management overlays in place.

2025 Outlook & Valuation

• Management targets ROE of ~13%, loan and deposit growth of 5–6%, NIM mid-single digit compression, net credit cost low single digit, and a 60% dividend payout.
• Valuations have de-rated to near pandemic lows (-1.5SD below mean P/B). Strong provision buffer offers upside potential from possible write-backs.
• Target price set at RM4.90 (1.60x 2025F P/B, 12.5% ROE).

ESG Initiatives

• Green loan campaign for energy-efficient vehicle financing.
• Paperless operations via e-statements and e-signatures.
• Gender diversity: 33% female board directors, 48% in top and senior management.
• 55% independent non-executive directors.

SP Setia: Land Monetisation and REIT Listing to Drive 2025 Earnings

Share Price: RM1.19
Target Price: RM1.95 (Upside: 63.9%)
GICS Sector: Real Estate
Market Cap: RM6.35b (USD 1.48b)
Major Shareholders: Amanah Saham Nasional (28.5%), Yayasan Pelaburan Bumiputera (20.9%), EPF (9.3%)
Analyst: Ng Jo Yee

1Q25 Performance & Outlook

• Core PATAMI: RM67m (-55% qoq, -11% yoy) on revenue of RM771m (-28% qoq, -48% yoy); within expectations (10%/16% of FY forecasts).
• Gross margin: 36.5% (+13.7ppt yoy), driven by improved cost efficiency and lower interest cost.
• Land sales revenue: RM67m in 1Q25, expected to reach RM760m for FY25 (major contributors: Setia Federal Hill, Alam Impian, Taman Pelangi, Alam Damai, and Setia Alaman Industrial Park).
• Industrial sales: Net margin guidance raised to 40–45% (from 30%) on higher pricing.
• 1Q25 sales: RM718m (15% of RM4.8b full-year target), with ramp-up in launches expected in 2Q–3Q25.

Strategic Developments

• REIT Listing: On track for 1H26, targeting 7–8 assets and a valuation of ~RM2b; will improve debt headroom.
• Battersea Power Station: Office tower at 47% occupancy; two new tenants could lift it to 70%. New phase (senior living, en bloc build-to-sell) to generate GBP600m in proceeds.
• Tanjung Kupang JV: Decision deferred to end-2025 for strategic flexibility.

Valuation

• BUY maintained; target price RM1.95 based on a 50% discount to RNAV (implied 14–15x 2025F–27F PE, 0.6x 2024–25F P/B).

ESG Initiatives

• Energy intensity ratio reduced to 12.6kW/h (from 17.9kW/h).
• SP Foundation invested RM405,154 in community initiatives.
• Strong transparency, anti-bribery and anti-corruption policy in place.

Malaysian Automobile Sector: Festive Break Dampens April Sales, Chinese Brands Accelerate

Industry TIV Trends

• April 2025 TIV: 60,527 units (-16.7% mom, +1.0% yoy) due to shorter Hari Raya work month and high base in March.
• 4M25 TIV: Down 5.4% yoy at 248,730 units.
• Passenger vehicles: Down 17.9% mom; commercial flat.

Brand Performance

• Perodua: 27,371 units in April (flat 4M25 cumulative at 112,462 units).
• Proton: 12,155 units in April; 45,963 units 4M25 (-7% yoy).
• Non-National Brands: Honda (-55% mom in April, -10% 4M25 yoy), Toyota (-4% mom in April, -8% 4M25 yoy), Mazda (-52% 4M25 yoy), Nissan (-4% 4M25 yoy).
• Chinese Brands: BYD up 87% in April and 41% in 4M25; Chery up 31% in 4M25 despite April drop.

Market Dynamics & Outlook

• Chinese brands’ combined market share up 4ppt yoy; Japanese leaders’ share fell to 28% (from 30%) of non-national PV sales in 4M25.
• Intensifying competition from new Chinese entrants (Zeekr, Denza, Jetour, iCaur Aion, Wuling) in ICE, PHEV, BEV segments, especially SUVs priced RM140k–160k.
• TIV forecast for 2025 maintained at 740,000 units (-9% yoy), with demand normalization expected and persistent pressure from global trade tensions and Chinese EV/CKD supply chain risks.

Traders’ Corner: Technical Picks

Central Global (CGB MK)

• Last Price: RM0.895
• Target Price: RM0.96, RM0.995
• Support: RM0.87 | Stop-loss: RM0.865
• Technical indicators (MACD, DMI, RSI) signal momentum; gradual price climb from RM0.87 support level.
• Expected timeframe: 2 weeks to 2 months

HCK Capital Group (HCK MK)

• Last Price: RM2.22
• Target Price: RM2.34, RM2.49
• Support: RM2.14 | Stop-loss: RM2.13
• Stock appears to have formed a base near RM2.14; RSI uptick and bullish MACD crossover support the case.
• Expected timeframe: 2 weeks to 2 months

Conclusion: Market Opportunities Amid Challenging Landscape

Malaysia’s equity market presents investors with a blend of high-growth, resilient, and value opportunities. Eco-Shop’s IPO stands out for its superior organic growth and scalable model. Public Bank remains a stalwart offering defensive appeal and potential upside from provision writebacks. SP Setia’s strategic land monetisation and REIT plans provide a catalyst-rich outlook. In autos, the rise of Chinese players signals a structural shift, while technical picks like Central Global and HCK Capital provide near-term trading opportunities. Investors should monitor macro developments and company execution for the remainder of 2025.