The research house downgraded the stock to a “hold” because the 29.5% rally over the past three months has already priced in expected near-term earnings growth and boost from Sumbangan Asas Rahmah (SARA).
In a note today, it said while the company will continue to benefit from SARA, the government’s cash handout programme, the “extra sales boost may gradually taper off”.
It estimates that over 2,000 99 Speedmart stores or 65.9% of total store count are enrolled under the SARA programme, positioning it to capture higher footfall and spending.
CIMB Securities expects incremental sales upside from the programme to moderate as it matures from the first half of 2026 onwards.
It added that broader retailer participation and the potential expansion of SARA eligibility to fresh produce could divert some spending away from fast moving consumer goods-focused retailers.
“Given 99 Speed Mart’s limited exposure to fresh produce (5% of sales), this may modestly dilute SARA-driven sales growth over time,” it noted.
It nevertheless raised its target price to RM3.92 from RM3.65 due to a higher projected price-to-earnings ratio (PER) of 41 times for calendar year 2027 (CY2027). This represents a 10% premium to the consumer large-cap CY2027F average of 37.3 times, it said.
CIMB Securities said the wider premium reflects 99 Speed Mart’s positioning as a key beneficiary of government cash assistance and its resilient daily essentials-focused sales mix.
99 Speed Mart fell 29 sen or 7.3% to a two-month low of RM3.66 earlier today before closing at RM3.73 or 5.6% lower, valuing the group at RM31.33 billion.
A majority of analysts surveyed by Bloomberg recommend holding the stock. The average 12-month target price for the stock is RM3.92 a share.
The shares have jumped 126% since it was listed in September 2024 at an IPO price of RM1.65.
The listing was Malaysia’s largest in seven years and catapulted its wheelchair-bound founder and CEO Lee Thiam Wah to billionaire status.
Forbes ranks him at No 8 in its Malaysia’s 50 Richest list, with a net worth of US$7.2 billion (RM28.1 billion).
Lee, 62, who contracted polio as an infant, started his entrepreneurial journey by selling snacks by the roadside as a teenager. He saved enough money to start a sundry shop in Klang in 1987 at the age of 23.
As his business prospered, he eventually established the 99 Speedmart chain which transformed him into one of the richest individuals in Malaysia.