UOB Kay Hian Private Limited
Date of Report: Tuesday, 19 August 2025
99 Speed Mart Retail: Accelerating Growth, Expanding Margin & Outpacing Industry Rivals in Malaysia

Company Overview: 99 Speed Mart Retail (99SMART MK)

99 Speed Mart Retail stands as Malaysia’s largest mini-market chain, dominating the grocery retail segment with extensive reach and a robust focus on daily necessities. With 8,400 million shares in issue and a market capitalization of RM20.24 billion (US\$4.80 billion), 99 Speed Mart is a household name and a key player in the nation’s consumer staples sector.

Investment Thesis: Strong Buy Maintained with Upgraded Target Price

UOB Kay Hian maintains its BUY recommendation on 99 Speed Mart, raising the target price to RM2.90 (up from RM2.60), representing a 16% upside. The upward revision is driven by the company’s highly visible store expansion, resilient demand for staple products, and effective margin management even amid industry headwinds such as minimum wage hikes and tariff disruptions.

Performance Snapshot: 2Q25 Results Beat the Industry Trend

99 Speed Mart delivered robust earnings in 2Q25, outperforming broader industry trends. Sales surged despite a generally sluggish retail environment, and management successfully expanded margins through increased other income, offsetting the full impact of the minimum wage hike.

• Store count increased by 9.4% YoY, with 248 new outlets bringing the total to 2,894.
• Revenue per store climbed 2.4%, outperforming the sector despite soft consumer sentiment during Hari Raya.
• Core profit for 1H25 reached RM296.4m, meeting 52% of UOBKH’s forecast and 50% of consensus estimates.

Financial Highlights and Forecasts

99 Speed Mart’s financials showcase steady growth and operational efficiency. Core profit margins and return metrics remain robust, with healthy cash generation and a conservative balance sheet.

Key Drivers of Growth: Store Expansion & Social Resilience

• Store Growth: The company plans to add 250 stores annually, maintaining double-digit revenue growth. By 2027, the store count is projected to reach 3,403.
• Revenue per Store: Forecasted to grow by 2% annually.
• Social Initiatives: 99 Speed Mart’s customer base is supported by minimum wage increases and government social assistance, underscoring the consistent demand for its staple products.
• Industry Trends: Bucked the trend with growth during periods where overall retail was weak, such as the Hari Raya season.

Margin Management: Navigating Wage Pressure & Other Income

Despite absorbing the full impact of minimum wage hikes, 99 Speed Mart managed to expand operating margins, driven by a 10% rise in other income. Gross margin held steady at 12.0% QoQ, and operating margin improved by 0.2ppt QoQ to 10.4%. Other income, accounting for 8.3% of revenue, is expected to remain strong as store and distribution center footprints expand.

Government Cash Handout: Direct Beneficiary, Impact Uncertain

99 Speed Mart is a key participant in the RM2 billion one-off government cash handout for basic necessities, benefiting from increased customer traffic. However, the full effect may be limited, as some of these funds could have been spent on essentials regardless, potentially shifting consumer spending rather than boosting overall sector growth.

Valuation: Premium Peer Comparison & Index Inclusion

99 Speed Mart is now an established constituent of the FBMKLCI Index. Peer analysis shows Nestle and QL traded at an average PE of 41.8x two years post-index inclusion. As a retailer, 99 Speed Mart is valued at a discount to FMCG peers, more in line with Mr. DIY, with a target price based on 38.9x 2026F PE (+0.5SD of Mr. DIY’s historical mean).

Risk Factors to Watch

• Potential sharp hikes in minimum wage affecting the supply chain
• Changes in foreign labor policy
• Reputational risk from unfavorable publicity or internal control failures

ESG Initiatives: Sustainability, Community & Governance

Environmental:

• Installed solar panels at 15 of 17 distribution centers, driving significant energy savings.
• “Say No to Plastic Bags” campaign, aiming for zero-plastic outlets across Malaysia.
• Recycled 21,500 tonnes of packaging waste in 2023, generating RM42 million in proceeds.

Social:

• Prioritizes local employment, especially in small towns and rural areas.
• Employs over 21,000 Malaysians (95% of total workforce).
• Workforce gender split: 49.7% female, 50.3% male.

Governance:

• Adherence to Malaysian Code on Corporate Governance (MCCG).
• Board composition meets MCCG’s criteria: at least 30% female directors and majority independent members.

Regional Penetration: Growth Opportunities Remain

Store penetration remains low in certain regions, offering a long runway for expansion. Below is a snapshot of outlet-to-population ratios across Malaysia:

Profit & Loss, Balance Sheet, and Key Metrics

Conclusion: 99 Speed Mart—A Defensive Retail Powerhouse with Room to Run

99 Speed Mart Retail continues to deliver outperformance through disciplined expansion, resilient product demand, and adept margin management. The company’s inclusion in the FBMKLCI Index, strong ESG profile, and attractive valuation compared to peers fortify its status as a top defensive pick in Malaysia’s retail sector.
With store penetration still low in key regions and a well-capitalized, highly visible rollout strategy, the growth story remains compelling for both short- and long-term investors. Risks exist but are outweighed by the company’s strengths and proactive management. UOB Kay Hian’s upgraded target price and BUY call reflect confidence in continued growth and margin durability through 2026 and beyond.