• 99 Speed Mart Retail Holdings Berhad (99SMART) is the Malaysia's largest homegrown minimarket operator, with 3,151 outlets and 22 distribution centres, and has grown revenue at a 12.3% CAGR over FY22-FY25 while lifting FY25 PATAMI by 30.5% to RM607.3m.

• Management is adding c.250 outlets a year towards 4,250 by 2030, weighted to underpenetrated Sabah, Sarawak and the East Coast.

• Operating leverage is the earnings kicker. Gross margin has risen from 19.0% (FY24) to 20.0% (1H26) while energy-efficiency spend trims utilities; PBT margin could potentially rise from 7.0% in FY25 to 7.6% by FY29F on a net-cash balance sheet.

• We initiate coverage on 99SMART with a BUY recommendation and a DCF-based TP of RM3.70 (WACC 6.55%, terminal growth 3.5%), along with a three-star ESG rating.

Key Investment Highlights

A long runway from a still under-penetrated network. 99SMART operated 3,151 outlets as at 30 June 2026 (+257 YoY), up from 2,024 in FY21, and management reiterates its target to open c.250 outlets annually towards 4,250 by 2030. The footprint remains concentrated in the Klang Valley, with Selangor accounting for 854 of the 3,032 Malaysian outlets as at end-2025, followed by Johor at 443. We see further expansion opportunities in under-penetrated markets, alongside Same-store sales growth (SSSG) growth. Each outlet is designed to serve a catchment of 1,500–2,000 households. New outlets typically break even in under three years and take three to five years to mature, providing an additional source of revenue growth as the network expands. We forecast 3,292/3,542/3,792/4,032 outlets in FY26F-FY29F.

Traffic-led same-store growth, with a policy tailwind we do not extrapolate. SSSG accelerated from 1.4% in 3Q FY24 to 11.9% in 3Q FY25 before easing to 7.2% in 2Q FY26, while average basket size remained broadly flat at c.RM21.4 over ten quarters. Sales growth has been driven by higher transaction volumes (+15.7% in 1H26), supported by extended opening hours (a 3%-5% sales uplift), the 'four items for RM10' promotions and an expanded government SARA cash-aid programme, with the allocation increasing to RM8bn in 2026 from RM5bn in 2025. We therefore assume SSSG normalises to 6.0% in FY27F-FY29F, below the 7.7% recorded in FY25 and 9.1% in 1H26, reflecting a more cautious view of underlying sales growth.

Scale is turning into margin. Gross margin improved from 19.0% in FY24 to 19.5% in FY25 and 20.0% in 1H26 (restated basis), while administrative and other operating expenses grew by 13.3%, below revenue growth of 15.5%, partly supported by lower utility costs from LED lighting, inverter air-conditioning and solar PV. The Group invested RM52.0m in energy efficiency in FY25, and 317 outlets now carry solar PV. Electronic shelf pricing, centralised inventory systems and a growing distribution centre network may further improve productivity.

Valuation and Recommendation. We initiate coverage on 99SMART with a BUY recommendation and a target price of RM3.70, based on a DCF valuation (WACC: 6.55%, TG: 3.5%). This yields an enterprise value of RM30.1bn, plus RM900m of net cash at FYE26F, for an equity value of RM31.0bn or RM3.70 per share, offering 19.0% capital upside and a 20.5% total return, including a 1.6% FY27F dividend yield.

Risk. Withdrawal or dilution of SARA/STR cash aid, wage and manpower cost inflation, and execution risk on new-outlet ramp-up and DC capacity.

Company Background

99 Speed Mart Retail Holdings Berhad (99SMART) is a Malaysian neighbourhood mini-market operator founded by Lee Thiam Wah, who opened the first 'Pasar Mini 99' outlet in Klang, Selangor, in 1992. The business subsequently expanded its retail network, reaching its 100th outlet in 2008, 1,000th outlet in 2017 and 2,000th outlet in 2021. The Group was listed on the Main Market of Bursa Malaysia on 9 September 2024 at an IPO price of RM1.65 per share. Lee Thiam Wah remains the Group’s Executive Director and Chief Executive Officer, with the founder and his family retaining a controlling stake. Today, 99SMART operates a nationwide network of neighbourhood mini-markets selling daily necessities, primarily fast-moving consumer goods (FMCG). As at 30 June 2026, the Group operated 3,151 outlets, supported by 22 distribution centres and an integrated delivery network. Beyond its core retail operations, the Group has introduced 99 Bulksales, an e-commerce bulksales platform, and established five pilot outlets alongside a small distribution centre in Fuzhou, China. The China operations remain at an early stage of development.

Business Model

99SMART operates a neighbourhood-based mini-market model, offering approximately 3,000 SKUs across 50 product categories at competitive prices. Its outlets are typically located in residential areas, providing convenient access to daily necessities. The business is supported by centralised bulk purchasing from 494 suppliers and manufacturers, alongside a network of 22 distribution centres that enables frequent replenishment across its store network. This combination of purchasing scale, logistics infrastructure and standardised store operations underpins its everyday-low-price positioning and supports the replication of its operating model across new locations.

The Group's outlets generally operate from 9.00 a.m. to 10.00 p.m., with selected high-traffic stores remaining open until 11.00 p.m. or 11.30 p.m. Management indicated that extended operating hours typically generate a 3%–5% sales uplift, primarily through additional transactions during the longer operating window. Average sales are approximately RM11,000 per outlet per day, equivalent to around RM330,000 per month.

An essentials-heavy mix. Food and beverages accounted for 73.4% of FY25 revenue, followed by personal and baby care products (11.5%), household products (7.8%) and others (7.3%). The high contribution from food and beverages reflects the Group's focus on recurring household purchases, while household products generally command higher gross margins among its major product categories. Consequently, changes in product mix may influence the Group's overall gross margin. Going forward, the Group’s efforts to diversify its sourcing and broaden its product range, including the introduction of electrical appliances (Figure 3), could create opportunities to capture higher-margin sales and improve its overall product mix, although the margin contribution will depend on product pricing, sourcing costs and customer uptake.

Beyond its core retail operations, 99SMART operates 99 Bulksales, an e-commerce bulk-sales platform, and has established five pilot outlets and a small distribution centre in Fuzhou, China. Both initiatives provide potential avenues for business development, although the China operations remain at an experimental stage.

A dense, still-expanding footprint. As at 31 December 2025 the group had 3,032 outlets in Malaysia and five in Fuzhou. Selangor (854), Johor (443), Perak (346) and Sabah (266) are the largest states, whereas Sarawak (20), Perlis (13), Terengganu (13) and Kelantan (1) are barely penetrated. The 22 distribution centres - seven in Selangor, four in Sabah, two each in Perak and Johor and one each in most other states - support the network, and a new 63,000 sq ft Semenyih DC commissioned in July 2026 will serve c.180 outlets.

Management and Governance

99SMART remains a founder-led business, with founder Lee Thiam Wah and his family controlling approximately 79.7% of the Group. The founder's significant ownership provides continuity and aligns management with long-term business performance, although concentrated ownership may limit minority shareholders' influence over corporate decisions. The nine-member Board comprises five independent directors (55.6%) and four women (44%), exceeding the Malaysian Code on Corporate Governance's 30% guideline for women representation.

What we watch. Governance considerations include family representation on the Board, recurrent related-party transactions and tax services provided to the Group by firms associated with the Chairman. While these relationships are disclosed and the Chairman recuses himself from relevant matters, independent oversight and transparent approval processes remain important safeguards for minority shareholders. In addition, our estimated free float of c.17% may constrain trading liquidity and index weighting.

Industry Overview

Malaysia's Retail Backdrop

Malaysia's retail sector continued to expand in 2026, supported by resilient domestic demand. The economy grew 6.0% YoY in 2Q26, up from 5.4% in 1Q26. According to DOSM, retail trade sales increased 6.5% YoY to RM71.7bn in August 2026, while sales at non-specialised stores, which include supermarkets and mini-markets, grew 7.5% to RM28.1bn. The online retail sales index also rose 6.7% YoY in August, highlighting the continued expansion of digital retail channels. While demand for everyday essentials provides a supportive backdrop for 99SMART, persistent cost-of-living pressures may keep consumers price-sensitive and intensify competition among value-oriented retailers.

Government Cash Aid as an Accelerant

The Sumbangan Asas Rahmah (SARA) programme provides eligible Malaysians with MyKad credits to purchase approved essential goods from participating merchants, including 99SMART. Under Budget 2027, the combined allocation for Sumbangan Tunai Rahmah (STR) and SARA will increase to RM16bn from RM15bn in 2026. Monthly SARA assistance of up to RM150 will be extended to all STR recipients, benefiting up to 9m Malaysians. Separately, eligible adults who are not STR recipients will receive a RM100 SARA MADANI payment twice in 2027. These measures could support spending on essential goods and provide a potential tailwind for 99SMART. However, the expansion of the SARA programme and its participating merchant network may intensify competition for aid-related spending. Given the uncertainty surrounding future policy allocations and the extent to which SARA contributes to the Group's same-store sales growth (SSSG), we remain cautious about extrapolating recent SSSG growth into our forecasts.

Competitive Landscape and Cost Environment

Malaysia's mini-market segment remains fragmented, with competition from organised chains, independent provision shops, supermarkets and hypermarkets. 99SMART's extensive outlet network, centralised procurement and 22 distribution centres provide purchasing and logistics scale, supporting its everyday-low-price positioning. However, continued expansion also increases staffing, depreciation and distribution costs. Operating expenses rose 13.3% in 1H26, with staff costs and depreciation among the key drivers, while management has identified manpower shortages, supply-chain disruptions and policy changes as key risks. Although demand for essential goods provides some resilience, cautious consumer spending and price competition may constrain margin expansion, making sustained cost discipline important to our earnings outlook.

Growth Vectors - Roll-out, Same-Store Growth and Operating Leverage

1. Outlet roll-out

We forecast net additions of 255/250/250/240 outlets in FY26F-FY29F, bringing the network to 4,032 outlets by FY29F, broadly in line with management's guidance of opening c.250 outlets annually. Expansion into under-penetrated markets, particularly Sabah, Sarawak and the East Coast, provides room to broaden the Group's geographic footprint beyond its core Klang Valley market. This rollout puts the Group within reach of its target of 4,250 outlets by 2030, assuming continued execution of its expansion plan.

2. Same-store growth and new-store maturation

Revenue per average outlet grew 4.5% in FY25A, below the Group's reported SSSG of 7.7%, reflecting a potential dilution effect from newer outlets that have yet to reach mature sales levels. We forecast SSSG of 6.8% in FY26F before normalising to 6.0% in FY27F–FY29F, amid tougher comparables and uncertainty over the sustainability of government cash-aid support. We also assume a maturation drag of 3.0 percentage points in FY26F, gradually narrowing to 2.5 percentage points by FY29F, resulting in revenue-per-outlet growth of 3.8%–3.5% over FY26F– FY29F. Combined with network expansion to 4,032 outlets by FY29F, this supports projected revenue growth of 13.0%/11.4%/11.0%/10.4% in FY26F–FY29F. Average basket size is forecast to remain broadly stable in FY26F before increasing by 1% annually from FY27F, reaching RM22.08 by FY29F

3. Operating leverage

We forecast gross margin to improve from 19.65% in FY26F to 19.85% in FY29F, supported by purchasing scale, product-mix optimisation and continued energy-efficiency initiatives. We assume personnel cost per outlet grows by 4.5% in FY26F and 3.5% annually thereafter, while other operating expenses remain at 2.45% of revenue, resulting in PBT margin expanding from 7.3% in FY26F to 7.6% in FY29F. However, the planned minimum-wage increase from June 2027 poses a key risk to margin expansion, particularly if wage costs rise faster than revenue per outlet. Our forecast therefore depends on continued gross-margin improvement and effective cost control to offset higher labour and operating expenses.

4. 99 Bulksales and China (optionality, not valued)

99 Bulksales, the Group's e-commerce bulk-sales platform serving retail and enterprise customers, recorded revenue of RM23.2m in FY24 and RM72.9m in FY25, followed by RM50.2m in 1H26. Quarterly revenue moderated to RM21.3m in 2Q26 from RM28.9m in 1Q26, although the platform remains a small contributor to Group revenue. We incorporate its revenue into our group forecasts but assign no separate valuation, given its limited scale and the uncertainty surrounding its longer-term profitability. Meanwhile, China's five-outlet pilot in Fuzhou remains experimental. We therefore treat both initiatives as potential upside optionality rather than key drivers of our base-case valuation

Financial Highlights

FY25 - a step-up in scale and margin. Revenue rose 14.5% to RM11,433.2m, driven by 259 net new outlets and SSSG of 7.7%. Gross margin expanded to 19.5% from 19.0% in FY24 (restated basis), while PATAMI increased 30.5% to RM607.3m, or 24.6% against FY24's Core PATAMI of RM487.5m. The Group generated RM903m in operating cash flow and ended FY25 with RM807m in net cash, excluding RM974m of lease liabilities, supporting its continued store expansion and dividend payments.

1H26 - momentum intact. Revenue grew 15.5% YoY to RM6,144.3m, with gross margin holding at 20.0%. PBT and PAT rose 20.8% and 21.8% YoY to RM466.8m and RM352.5m, respectively, supported by network expansion, higher sales transactions and utility cost savings. 2Q26 PAT eased slightly QoQ as supplier rebates normalised following stronger double-festive promotional activity in 1Q26. 1H26 reported PAT accounted for 49% of our FY26F PATAMI forecast of RM719.5m, implying 2H26F earnings growth of 15.5%, compared with 21.8% growth in 1H26, as we prudently factor in tougher comparables following the SARA-driven uplift in 2H25.

Earnings outlook. We forecast core PATAMI of RM719.5m / RM815.0m / RM914.4m / RM1,021.8m for FY26F-FY29F, representing YoY growth of 18.5%/13.3%/12.2%/11.7%, respectively. Core EPS is projected to rise from 8.6 sen in FY26F to 12.2 sen in FY29F, supported by continued store expansion, positive SSSG and gradual margin improvement. Our forecasts assume SSSG normalises to 6.0% from FY27F onwards, while disciplined cost management offsets wage and operating-cost pressures. We expect net cash, excluding lease liabilities, to increase from RM900m in FY26F to RM1,566m in FY29F, assuming a 50% earnings payout ratio.

Valuation and Recommendation

We initiate coverage on 99SMART with a BUY recommendation and a target price of RM3.70, based on a DCF valuation (WACC: 6.55%, TG: 3.5%), implying a forward FY27F P/E of 38.1x. Our positive view is underpinned by the Group’s potential to unlock further earnings growth through three strategic initiatives: (i) broadening its product range through more diversified sourcing, including electrical appliances at selected outlets; (ii) scaling up its bulk sales platform to capture additional demand; and (iii) expanding beyond Malaysia to access new growth markets.

Investment Risk

1. Government cash-aid dependence. SSSG accelerated to 11%-12% following the expansion of SARA and has since eased to 7.2%. Although Budget 2027 provides for higher combined STR and SARA allocations, the programme's contribution to 99SMART's SSSG remains undisclosed. Any reduction in assistance, changes in eligibility or increased competition from participating merchants could weaken sales growth and cause SSSG to fall below our 6.0% assumption.

2. Wage and cost inflation. Personnel expenses amounted to RM862.6m in FY25, equivalent to 7.5% of revenue, and grew 18% YoY. Management has also identified manpower shortages as a key operating risk. Higher minimum wages, staff shortages and utility costs could put pressure on margins if cost increases outpace revenue per outlet.

3. Execution and competition. Sustaining annual additions of c.250 outlets require timely investment in distribution centres, fleet capacity and manpower. New outlets typically take three to five years to mature, while increasing store density may raise cannibalisation risk. In addition, competitive pricing and fluctuations in supplier rebates could constrain gross-margin improvement. Although 99 Bulksales and the China pilot offer potential growth opportunities, their small scale and uncertain profitability may also require management attention without materially contributing to near-term earnings

4. Governance, ownership and liquidity. The founder family controls c.79.7% of 99SMART, while family members sit on the Board and firms associated with the Chairman provide advisory services to the Group. Although these relationships are disclosed, independent oversight and transparent approval processes remain important for minority shareholders. In addition, our estimated free float of c.17% may constrain trading liquidity, while the Group's non-Shariah compliant status limits its eligibility for investment by certain Shariah-mandated funds.