Broker: Maybank Investment Bank Berhad
Date of Report: July 30, 2025

Eco-Shop Marketing: Malaysia’s Dollar Store Giant Poised for Growth

Introduction: Priced for the People

Eco-Shop Marketing (ESM), Malaysia’s largest dollar-store chain, stands out as a dominant player in the consumer discretionary sector. With a vast network of 371 stores as of May 2025 and a compelling value proposition anchored in affordability, ESM is set for robust expansion. The company boasts a diversified product portfolio, a powerful house brand strategy, and a remarkable revenue market share of 68%. Analyst coverage initiates with a BUY rating and a target price (TP) of MYR1.45, reflecting confidence in sustained growth.

Widest Dollar-Store Network and Strategic Positioning

• Number of stores (May 2025): 371 (349 Eco-Shop, 22 Eco-Plus)
• Penetration: Present in every Malaysian state and federal territory except Labuan
• Store format: Mix of retail mall-based (58) and standalone (313) locations
• Average selling area: Over 2.35 million sq ft, targeting catchment areas of 20,000–30,000 people per store

ESM operates two core store formats:

• Eco-Shop: Fixed price of MYR2.60 (Peninsular Malaysia) and MYR2.80 (East Malaysia/Langkawi). Price increases were implemented in response to rising costs.
• Eco-Plus: Multi-tier pricing (MYR2.60, MYR6.00, MYR10.00 in Peninsular Malaysia; MYR2.80, MYR6.60, MYR11.00 in East Malaysia).

Comprehensive Product Range and House Brand Advantage

Each store carries up to 13,000 SKUs, spanning four main categories:

• General merchandise (43% of FY25 gross revenue)
• Food (37%)
• Non-food (14%)
• Softline (6%)

Key features:

• 29 proprietary house brands, covering approximately 10,000 SKUs, contributed 58% of total revenue in FY25.
• Most products are sourced directly from end-suppliers in China, Thailand, Indonesia, and Turkey (68.7%), with the remainder locally sourced.
• House brands provide higher gross profit margins and strong customer loyalty.

Financial Metrics and Growth Forecasts

Key Financials (MYR m):

• 3-year net profit CAGR (FY25-FY28E): 20% (driven by 17% revenue CAGR and margin expansion)
• Gross profit margin to rise from 28% (FY25) to 31% (FY26E-FY28E)
• Store expansion: Targeting 70 new stores per year through FY28E
• Same store sales growth (SSSG): Expected to recover to 2–3% (FY26E–FY28E) after FY25’s -0.4%
• Dividend policy: Targeting 60% payout ratio, with yields rising to 3% by FY28E
• Net cash position maintained from FY26E onwards, despite heavier capex for distribution network upgrades

Competitive Edge: Scale, Supply Chain, and Resilience

• Market share: 68% revenue share in Malaysia’s dollar store market; nearest competitor at 10.2%
• Economies of scale: Direct sourcing from end-suppliers, bulk aggregation in China, and in-house repackaging lower costs and improve pricing power
• Distribution infrastructure: Three strategically located distribution centers (Johor, Selangor, Sarawak) and a fleet of 160+ delivery trucks, with plans to expand further
• Payback period: Rapid average payback of 1.6–1.7 years for new stores
• All-weather business: Demonstrated resilience during macroeconomic shocks, including positive sales growth during COVID-19 (2020: +4.6% YoY)

ESM’s house brands and SKU diversity allow the company to serve a broad customer base while sustaining higher margins than peers.

Industry Landscape: Room for Penetration and Growth

• Malaysia’s dollar store penetration: 21 stores per million population (2023), compared to 84 in Japan, 125 in Canada, and 118 in the US
• Industry growth: Non-grocery dollar store segment grew at a 19.9% CAGR (2016–2023) and is expected to maintain a 15.1% CAGR through 2028
• Market size: Dollar store sales value rose from MYR1 billion (2016) to MYR3.4 billion (2023); projected to reach MYR6.8 billion by 2028

ESM’s dominance is underpinned by its store count, geographical reach, and superior supply chain, creating high barriers to entry for new competitors.

Future Plans and Expansion Strategies

• Consistent store network expansion, with a focus on suburban and rural markets
• Increasing mix of high-margin house brands, including rebranding initiatives under “by Eco-Shop”
• Leveraging scale to negotiate better supplier contracts and reduce input costs
• Investing in digitalization, retail management systems, and automation at distribution centers
• Enhancing customer loyalty programs and using data analytics for targeted marketing
• Distribution network upgrades: New warehouses planned in Selangor (MYR22.7m capex, FY26 completion) and Sabah (MYR520.7m capex, FY27 completion); throughput capacity to increase from 4.7m to 12.3m pieces daily by 2027
• Exploring international sales, with a distributorship agreement in Vietnam

Key Financial and Operational Risks

• Heavy reliance on brand reputation and trademark protection
• Risks associated with tenancy agreements for key distribution centers and stores
• Challenges in executing rapid store expansion, including supply chain, labor, and infrastructure bottlenecks
• Vulnerability to global supply chain disruptions—including geopolitical and economic risks affecting 69% of SKUs sourced abroad
• Currency volatility (notably CNY/MYR exchange rate movements)
• Potential delays or cost overruns in planned distribution center investments
• Uncertain impact of pricing strategies and potential for consumer pushback with rising prices
• Inflationary pressures affecting consumer spending in core target segments

Peer Comparison: How Eco-Shop Stacks Up

• ESM trades at a 10% premium to domestic retail peers due to superior 3-year profit CAGR (20% vs. peer average of 18%)
• Dividend yield expected to rise to 3% by FY28E, with strong free cash flow supporting payouts

Management and Governance

The company is helmed by an experienced board, with Dato’ Sri Lee Kar Whatt (Managing Director) and Ng Kim Teng (Chief Executive Officer) leading strategic planning and execution. The management team’s depth, coupled with a strong governance structure, supports ESM’s ambitious growth agenda.

Conclusion: BUY Recommendation and Outlook

ESM’s dominant market position, expansive store network, and robust financial metrics make it a top pick in Malaysia’s consumer retail sector. With a fair valuation at MYR1.45 (29x CY26 PER), investors can expect a 15% total shareholder return, underpinned by double-digit earnings growth, continued store expansion, and the company’s ability to capitalize on Malaysia’s underpenetrated dollar-store market.