---
endpoint: analytics
pattern: Consumer
status: done
latency_ms: 415766
conversation_id: 1416c01b-e99d-495f-a794-b034c2139a8f
citations: 13
created: 2026-05-31 22:19:09Z
---

# What is the investment thesis for 99 speedmart in the current market environment?

# 99 Speed Mart Retail Holdings (5326.MK / 99SMART) — Investment Thesis

## Quick Take
99 Speed Mart is **Malaysia's largest homegrown mini-market chain**, with market capitalisation north of **RM20 billion** at end-2024 and a recent share price around **MYR 3.43** as of mid-May 2026 [4][13]. The thesis rests on three legs: (1) a **defensive, staples-driven** business model insulated from cyclicality, (2) a **multi-year outlet rollout runway** in an under-penetrated mini-market segment, and (3) **expanding gross margins** as scale economics, direct sourcing, and supplier-rebate optimization play through. The principal pushbacks are a **stretched valuation** (recently triggering a sell-side downgrade), inflationary cost pressure on basket size, and growing competition from rival neighbourhood retailers.

## 1. Business Model: Defensive Staples Compounding

- **Market position**: Malaysia's largest homegrown mini-market and leading groceries retailer, with **2,800+ outlets and 20 distribution centres** across the country as of end-2024 and over 3,000 SKUs across ~50 categories [4]. The chain ended FY2025 with **3,037 outlets** [3].
- **Strategy**: Management's core formula is "**high sales volume with sustainable profit margins**" — competitive pricing drives traffic; low fixed costs, scale-driven supplier terms, and own-DC logistics protect margins [5].
- **Defensiveness**: Mini-markets prioritising essential goods are positioned as **inflation-resistant** because households trade down into the format when purchasing power tightens [7]. The "Near 'n Save" proximity model means each store serves a local catchment that is largely insensitive to discretionary cycles.

## 2. Growth Engine: Outlet Rollout + Channel Extension

- **Multi-year outlet runway**: The company has a long-stated strategy to **continue expanding its outlet network across Malaysia**, with sales, costs and profitability scaling directly with store count [6]. Management guided to opening **~250 outlets in 2026** off the FY2025 base of 3,037 — implying ~8% unit growth before any same-store contribution [3].
- **Track record of compounding**: Prospectus disclosure showed revenue CAGR of **10.4% from RM6,841.4m (FYE2020) to RM9,210.5m (FYE2023)** with PAT compounding at **13.3%** over the same window [8].
- **Channel diversification**: The **99 Bulksales** e-commerce platform (launched 2023, expanded into Southern Peninsular in mid-2024) contributed ~0.6% of FY2025 revenue — small but a new optional growth lever for B2B and bulk-buy customers [1].

## 3. Financials: Top-Line Acceleration + Margin Expansion

| Metric | FY2024 | FY2025 | YoY |
|---|---|---|---|
| Revenue (RMm) | 9,981.6 | **11,433.2** | **+14.5%** |
| Gross profit (RMm) | 1,893.2 | **2,226.5** | +17.6% |
| Gross margin | 19.0% | **19.5%** | +50 bps |
| Admin & other opex (RMm) | 1,245.9 | 1,430.7 | +14.8% |
| Outlets (count) | ~2,800+ | **3,037** | +~240 |
| Employees | n/a | 25,647 | — |

Source: [1][2][3][9][11]

Key takeaways:

- **FY2025 revenue grew 14.5%** vs FY2024, driven by new-outlet contributions, extended operating hours at selected locations, the Bulksales platform, and "**growth of convenience-driven purchasing behaviour among consumers**" [1].
- **Gross margin expansion (19.0% → 19.5%)** reflects: (a) **leveraging economies of scale**, (b) **optimising direct sourcing from manufacturers**, and (c) a reclassification of supplier rebates/incentives from other operating income into a deduction against cost of sales [2]. Note: the reclassification is partly cosmetic but ongoing margin discipline is the genuine driver.
- **Opex grew 14.8%**, broadly in line with revenue — staff additions for new outlets, utilities, and depreciation on store/DC investment. Management is signalling cost discipline, with operating cost growth "aligned with revenue expansion" [11].
- The **direct-sourcing strategy** (local + overseas manufacturers / brand principals, bypassing intermediaries) is the structural margin lever [10] — reinforced by the China-based procurement entities (Yiwu J-Jade and Yiwu Speed Mart) incorporated to strengthen sourcing economics.

## 4. Market Reception and Sell-Side Reset

99SMART listed on Bursa's Main Market on **9 September 2024** — winning Best IPO in Southeast Asia 2024 — and quickly became a megacap consumer staples name. Trading flow since listing has been volatile around results:

- **May 2026** (1Q26 results): **+4.6%** on earnings to MYR 3.43 [13].
- **April 2026**: +5.3% intraday move to MYR 3.59.
- **February 2026** (FY2025 results week): -6.3% reaction on earnings day, with **CIMB Securities downgrading the stock to HOLD from BUY** [12]. The share traded down to MYR 3.70 immediately post-print.
- **November 2025** (3Q25): +2.2% on results.

The CIMB downgrade is the single most important sell-side data point in the recent record. It does not reflect a thesis break — earnings continued to compound — but a **valuation reset**: at 3.7x sales and a premium multiple to regional grocery peers, the upside is increasingly back-loaded onto outlet rollout cadence rather than near-term EPS surprise.

## 5. Risks

- **Valuation**: Now trades at a premium to regional grocery comps. CIMB's downgrade to HOLD in Feb 2026 [12] signals sell-side caution that the easy money has been made.
- **Inflation pressure on basket size**: In the IPO disclosure window (9M2024), **average basket size fell 4.1% to RM21.40 even as transaction count grew 13.4%** — i.e. growth was unit-driven, not ticket-driven, when consumer disposable income tightened. Persistent inflation could continue compressing basket size.
- **Supply chain concentration**: ~700 suppliers, with most based in Malaysia; mid-2022 Russia-Ukraine wheat-product disruption already demonstrated the fragility [shown in prospectus risk factors].
- **Competition**: Eco-Shop Marketing (5337.MK), Aeon, KK Mart, and other neighbourhood formats are scaling. The 99SMART moat — proximity + price + own-DC logistics — is durable but not unique.
- **Founder/key-person**: The brand was built by founder Lee Thiam Wah; governance and succession are points to monitor for a now-public name.
- **Labour costs**: Workforce expanded to 25,647 employees at end-FY2025 to support the growing outlet network [9] — staff costs are the largest opex line and sensitive to Malaysia's minimum-wage progression.

## 6. Bull / Bear Synthesis

**Bull case** (compounding staples-platform thesis): 250 net new outlets per year × low-teens revenue growth × steady ~50bp/yr gross-margin expansion from scale + direct sourcing = mid-teens earnings CAGR for several years. The format itself is **structurally inflation-positive** (consumers trade down into it) [7], so cyclical resilience is real. At a high-quality, founder-backed Malaysian consumer staple with monopoly-like share in the mini-market segment, the multiple is justifiable if execution holds.

**Bear case** (priced-for-perfection): The stock has already re-rated post-IPO; CIMB has called the top for now [12]; basket-size compression in inflationary windows signals real-wage softness in the customer base; opex growth is keeping pace with revenue (operating leverage modest, not explosive); store-density risk eventually means each incremental outlet cannibalises a sibling within a small Klang Valley catchment.

## 7. Current-Environment Read (May 2026)

- **FBM KLCI** is hovering around 1,728 in mid-May 2026 [13] vs ~1,620 in mid-November 2025 — a constructive equity tape for Malaysian large-caps.
- 99SMART's recent **bounce to MYR 3.43 (+4.6% on 1Q26 results)** [13] suggests the FY2025-results sell-off has stabilised and the buy-side is willing to re-engage on continued execution.
- **No CLSA-published research** on 99 Speed Mart was found in the internal RMS archive — note that internal hits on "5326" map to **Vanguard International Semiconductor (5326 TT, Taiwan)**, not 99 Speedmart (5326.MK Malaysia). The thesis above is built from the company's own filings (FY2024 Annual Report, FY2025 Integrated Annual Report, IPO Prospectus) and recent market-flow news.

## Bottom Line

99 Speed Mart offers a **rare combination in Malaysian staples**: a category-leading, owner-operated, scale-advantaged neighbourhood grocer with multi-year outlet runway, expanding gross margins, and resilient consumer demand. The investment case is **constructive on a 12-24 month view** at current levels — but the valuation no longer leaves much room for execution slippage, and sell-side has begun calling for a pause. The right setup is to **own it for the outlet-rollout compounding**, not for near-term multiple expansion, and to monitor basket-size trends and CIMB-style downgrades as the key sentiment markers.

---
**Sources**
[1] 99 Speed Mart — Annual Report 2025 (Part 2) — Group Financial Review (Revenue)
[2] 99 Speed Mart — Annual Report 2025 (Part 2) — Gross Profit / Margin Discussion
[3] 99 Speed Mart — Integrated Annual Report 2025 — CEO Message (revenue, outlet count, 2026 plan)
[4] 99 Speed Mart — Annual Report 2024 (Part I) — About 99 Speedmart (mkt cap, store base)
[5] 99 Holdings Prospectus (Part 1) — Business Strategy
[6] 99 Holdings Prospectus (Part 2) — Outlet Expansion Strategy
[7] 99 Speed Mart — Annual Report 2024 (Part I) — Inflationary Pressures / Market Conditions
[8] 99 Holdings Prospectus (Part 1) — Historical Financial CAGR
[9] 99 Speed Mart — Integrated Annual Report 2025 — Stakeholders / Employees Disclosure
[10] 99 Speed Mart — Annual Report 2024 (Part I) — Supply Chain and Direct Sourcing
[11] 99 Speed Mart — Annual Report 2025 (Part 2) — Operating Expenses
[12] StreetAccount Summary — Southeast Asia midday trading update (16-Feb-2026): CIMB downgrade
[13] StreetAccount Summary — Southeast Asia midday trading update (19-May-2026): +4.6% on 1Q26 earnings

*Note on RMS coverage: The internal CLSA research archive does not contain dedicated coverage of 99 Speed Mart Retail Holdings (Bursa: 5326). Ticker "5326 TT" in the archive maps to Vanguard International Semiconductor (Taiwan), a different company. Thesis above is built from primary filings and public news.*

## Citations

- [1] **99SMART - Annual Report 2025 (Part 2)** · external
- [2] **99SMART - Annual Report 2025 (Part 2)** · external
- [3] **99 Speed Mart Retail Holdings Bhd. (107KKS-E) - Annual Report for period end 31-Dec-2025 (English) - PDF - 5 / 5** · external
- [4] **99SMART - Annual Report 2024 (Part I)** · external
- [5] **99 Holdings Prospectus (Part 1)** · external
- [6] **99 Holdings Prospectus (Part 2)** · external
- [7] **99SMART - Annual Report 2024 (Part I)** · external
- [8] **99 Holdings Prospectus (Part 1)** · external
- [9] **99 Speed Mart Retail Holdings Bhd. (107KKS-E) - Annual Report for period end 31-Dec-2025 (English) - PDF - 4 / 5** · external
- [10] **99SMART - Annual Report 2024 (Part I)** · external
- [11] **99 Speed Mart Retail Holdings Bhd. (107KKS-E) - Annual Report for period end 31-Dec-2025 (English) - PDF - 4 / 5** · external
- [12] **StreetAccount Summary - Southeast Asia midday trading update** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4559935&_doc_date=2026-02-16&_doc_product=SA>
- [13] **StreetAccount Summary - Southeast Asia midday trading update** · news — <https://my.apps.factset.com/viewer-fusion/?_doc_id=sa_story_4686079&_doc_date=2026-05-19&_doc_product=SA>

